BELARUS NEWS AND ANALYSIS

DATE:

01/08/2007

Russia's Gazprom Warns Belarus

It Will Cut Gas Supply Due to Debt

By GREGORY L. WHITE

MOSCOW -- Russian gas giant OAO Gazprom has warned Belarus that it will slash supplies of the fuel starting Friday because of Minsk's growing debts for shipments so far this year, a Gazprom spokesman said Wednesday.

Gazprom's moves over the last few years to end discounted prices for most of Russia's formerly-Soviet neighbors have led to supply cutoffs that have interrupted Russian supplies to customers in Western Europe and triggered allegations Moscow is using its gas resources as a political weapon.

The Gazprom spokesman said the company hoped that the cutbacks to Belarus won't impact its shipments to customers further West. The bulk of Russia's exports to Europe travel across Ukraine and Gazprom controls major export pipelines across Belarus, but some supplies to clients including Poland and Lithuania are carried in domestic Belarussian networks that might be impacted by a cutback. The Gazprom spokesman said the company is alerting its European customers to the cutbacks Wednesday.

Belarus last year agreed to pay $100 per thousand cubic meters of gas this year, more than double the previous price but still far below the European level of about $260. To ease the impact, Gazprom agreed to allow Minsk to pay only $50 for the first half of the year, with the remainder payable last month. But talks in Minsk last week on that debt, which Gazprom put at $456 million, ended without agreement.

As a result, Gazprom Tuesday warned Belarus in a telegram that it would cut supplies to the value of what Minsk was actually paying, or by about 45%, starting Aug. 3. The Gazprom spokesman said that with consumption already low in summer, Minsk should be able to adapt.

"They aren't fulfilling their obligations under the contract, so we will reduce supplies in line with what is actually being paid," the spokesman said.

Belarussian officials couldn't immediately be reached for comment. In recent weeks, they have argued that Moscow's price demands are politically motivated and unfair and that Belarus should be entitled to the low prices Russian domestic consumers enjoy. Belarus' state-controlled economy depends heavily on cheap fuel from Russia, and Minsk in January briefly shut off Russian oil exports across its territory after Moscow raised prices. Moscow is planning to sharply increase domestic gas prices over the next few years in a drive to rationalize consumption of the fuel, however.

Source:

http://online.wsj.com/article/SB118595503292384535.html?mod=googlenews_wsj