BELARUS NEWS AND ANALYSIS

DATE:

03/08/2007

Threat of gas supply cuts lifted after Belarus pays part of debt to Gazprom

The Associated Press

MOSCOW: An eleventh-hour deal struck Friday after Belarus paid part of its ?334 million ($456 million) gas bill to Russia's Gazprom has temporarily lifted fears of a supply disruption through major export arteries to Europe.

Belarusian officials offered assurances that the remaining amount would soon be transferred, but negotiations continued and it was not clear if Belarus would come up with the money to meet a new deadline at the end of next week.

Belarusian President Alexander Lukashenko could draw out the talks to try to coax the best deal possible from Russia to cushion his country's economy from the impact of higher energy prices, Belarusian experts said.

Gazprom spokesman Sergei Kuprianov issued a new warning Friday evening, telling the Ekho Moskvy radio station that gas supplies would be cut by 30 percent if Belarus did not find the money.

State-controlled Gazprom, the world's biggest producer of the fuel, threatened on Wednesday to cut nearly half of the gas Belarus receives as of 10 a.m. Friday if the bill was not paid.

That fueled fears that Belarus could siphon gas from pipelines carrying one-fifth of Russia's gas exports to Europe, and highlighted once again the vulnerability of the web of pipes that Russia uses to get its energy exports to Western markets.

Russian and Belarusian energy officials negotiated through the night to reach a last-minute deal on Friday morning.

"Today we received a payment document, according to which Belarus paid a significant part of the debt to Gazprom," Kuprianov said in televised comments outside Gazprom's towering glass-and-steel Moscow headquarters.

"Thus, we see real steps by the Belarusian side to resolve the debt problem. Today, a decision was taken not to limit supplies to Belarus. We expect full payment within a week," he said.

Europe appears to believe the crisis has passed, canceling an urgent meeting of gas experts from the EU's 27 member nations scheduled for next week.

"We are convinced after our contact with the two parties that for the moment the dispute is settled," said EU spokesman Martin Selmayr. "We continue to monitor the situation closely," he added.

The standoff has its roots in a supply contract signed in the last minutes of 2006 that obliged Belarus to pay ?73 per 1,000 cubic meters of gas, instead of ?34.

The agreement allowed Minsk to pay ?40 per 1,000 cubic meters for the first half of the year - giving its economy time to adjust - but required payment of the balance of ?334 million by July 23.

Belarus has paid ?139 million of the debt so far, an official with the Belarus pipeline operator Beltransgaz told The Associated Press on Friday.

"Currently the Beltransgaz delegation is in talks with the management of Gazprom regarding a schedule for paying the debt in full," first deputy general director Tsvetomir Sorokhan said. "So far there are no changes in gas volumes to Belarus."

In an earlier gas pricing fight with Ukraine, Gazprom halted direct shipments there in early January 2006, and deliveries to the EU then dropped as Ukraine siphoned gas from a transit pipeline. Gazprom supplies a quarter of the gas used by Europe, and the incident drove home Europe's dependence on Russia for energy.

A dispute over oil duties with Belarus in January this year saw a fall in crude supplies to some European countries.

Concern in the latest dispute receded somewhat Thursday evening when Lukashenko said the money would be paid in full from state coffers in coming days.

A possible loan from Venezuelan President Hugo Chavez - who called Lukashenko his "brother-in-arms" during a recent visit - could help replenish the reserves, he suggested.

"Of course this is a hard test for our economy," Belarusian First Deputy Energy Minister Eduard Tovpenets said Friday. He accused Russia of using "ultimatums" to resolve the dispute and said the remaining amount would be paid "soon."

Experts in Minsk predicted the Belarusian government would negotiate as long as possible.

"Lukashenko will drag it out and put off making payments to Gazprom until he finds a beneficial loan in Russia or somewhere else," former Prime Minister Mikhail Chigir said.

"Lukashenko could pay today," the former chairman of the Belarusian Central Bank, Stanislav Bogdankevich, said. "But he's hoping that over the next week he can coax an advantageous payment scheme out of Gazprom, or get a good loan from the Russian government or his friend Hugo Chavez," he said.

In a speech Friday to businessmen during the ASEAN regional forum in Manila, Russian Foreign Minister Sergey Lavrov reassured his audience that Russia was a reliable energy supplier.

Russia guaranteed energy supplies "to every country, not only friends or allies," he said.

Associated Press correspondents Yuras Karmanau in Minsk and Aoife White in Brussels contributed to this report. Source:

http://www.iht.com/articles/ap/2007/08/03/business/EU-FIN-COM-Russia-Belarus-Gazprom.php