BELARUS NEWS AND ANALYSIS

DATE:

24/09/2007

Minsk to link gas price to Russian gas transit to Europe-Lukashenko

MINSK, September 24 (Itar-Tass) -- Belarusian President Alexander Lukashenko thinks that Russia's Gazprom is taking advantage of his country.

"Gazprom is making a fortune and taking advantage of us," he told the media in the city of Rechitsa.

The concern plans to enlarge gas prices for Belarus by 15-20% next year, Lukashenko said. "I do not know what is our fault in the eyes of Russia. Certain monopolies have been blinded by the green light. They see nothing but money," he added.

Belarus "will have a firm motivation" in the negotiations on the prospective gas contract, Lukashenko said. "Gazprom sells gas in Belarus with the same profitability as it does in Germany. In fact, they are trading with Germany and us on equal terms," he said.

In his opinion, it will not be easy to sign a gas contract for next year, and last year's situation may repeat. "Everything is possible. It depends on the progress of the negotiations. We will try to sign this contract before the Kremlin chimes strike the New Year in," he said.

Belarus will link the Russian gas charges to gas transit to Europe, Lukashenko said.

Gas has been a stumbling stone in the economic relations between Russia and Belarus for a long time. Belarus was the last country to receive Russian gas at the super-preferential price of $46.68 per 1,000 cubic meters until the recent past. Meanwhile, Armenia buys Russian gas at $110 per 1,000 cubic meters, and the price is $170 for Moldova.

Moscow and Minsk signed an agreement in April 2002, which envisaged Russian gas deliveries at domestic prices of $33.5 per 1,000 cubic meters. The same agreement said that a corporation must be formed on the Beltransgaz basis in cooperation with Gazprom before July 1, 2003. The corporation was bound to replace the Belarusian state gas transport company.

The joint venture was not formed by that deadline, as Gazprom evaluated Beltransgaz at $600 million, and Minsk demanded $5 billion. Minsk disregarded the initial terms of the agreement, and Russia stopped gas deliveries on preferential terms. It offered Belarus to buy gas at $50 per 1,000 cubic meters, but the Belarusian government turned down the offer.

In June 2004 the sides signed a contract on Gazprom's deliveries of 10.2 billion cubic meters of gas to Belarus in the second half of that year for $46.68 per 1,000 cubic meters.

The price did not change in contracts for 2005 and 2006, and the deliveries amounted to 19.1 billion and 21 billion cubic meters correspondingly.

On March 30, 2006, Gazprom CEO Alexei Miller said that gas prices for Belarus will grow to the European level of $200 per 1,000 cubic meters in 2007. He also offered Belarus to sell 50% stake in Beltransgaz to Gazprom in compensation. Russia evaluated Beltransgaz at $1.5-2 billion, while the Belarusian bid was $17 billion.

A contract on gas deliveries to Belarus and transit to Europe was signed after long negotiations on December 31, 2006. The contract set the gas price for Belarus at $100 per 1,000 cubic meters. Belarus pledged to pay for 55% of gas deliveries in the first half of this year, transfer the rest by July 23, and start 100% payments for current supplies on July 1. Belarus again thwarted the agreement, and Beltransgaz's debt amounted to $456.16 million.

Meanwhile, Gazprom timely transferred $625 million for 12.5% stake in Beltransgaz it had acquired.

The contract says that the Russian concern will pay $2.5 billion for 50% stake in Beltransgaz by equal installments within four years.

Gazprom said on August 1 it will reduce gas deliveries to Belarus because of the debt. Belarus has fully repaid the debt by now.

Source:

http://www.itar-tass.com/eng/level2.html?NewsID=11898312&PageNum=0