BELARUS NEWS AND ANALYSIS

DATE:

18/12/2006

Russian gas demands irk Belarus

Relations between the two leaders have become fractious

Russia and Belarus seem no closer to reaching an agreement over a dispute about the cost of gas supplies after a meeting of the two countries' leaders.

Russia has threatened to quadruple the amount its neighbour pays for its imports unless it takes control of Belarus' gas distribution network.

The dispute has strained relations between the two traditional allies.

It is similar to recent rows Russia has had with Ukraine and Georgia over what they pay for its gas.

Pressure applied

Russia temporarily cut off gas supplies to Ukraine in January after a quarrel over pricing.

Moscow says its neighbours have been paying below-market rates and these now need to be brought into line with European prices.

Putin is trying to maximise the pressure on Lukashenko to force the Belarusian leader to play by Russian rules

Yaroslav Romanchuk, analyst

Critics argue Moscow is using strong-arm tactics to consolidate its economic supremacy in the region, at a time when high demand for energy and fears of supply shortages have strengthened its position as Europe's leading gas supplier.

Analysts said Russian President Vladimir Putin and his Belarussian counterpart Alexander Lukashenko had made little progress on resolving the dispute at a meeting on Friday.

Neither leader referred to the issue in their public comments but Mr Lukashenko, a close ally of President Putin in the past, said the talks had been "long and difficult".

Pipeline dispute

Belarus currently pays $47 per 1,000 cubic metres for the gas its imports from Gazprom, Russia's state-owned gas monopoly.

Gazprom has said this will increase to $200 early next year unless Belarus cedes control of its distribution network, including a valuable transit pipeline which supplies gas to Poland and Germany.

Moscow wants to buy Beltransgas for $4bn but Minsk says that the business is worth four times that amount.

Analysts said a hefty price rise over the winter could further undermine Belarus' struggling, largely state-controlled, economy.

"Putin is trying to maximise the pressure on Lukashenko with prices on energy consumers in order to force the Belarusian leader to play by Russian rules," said Yaroslav Romanchuk, a Minsk-based economic analyst.

Russia is involved in a similar dispute with Georgia, which has refused to accept Moscow's demand for a doubling in prices.

But Moscow has renegotiated its gas contract with Bulgaria, which will see the latter pay up to 45% more for its gas imports over the next five years.

The agreement, concluded on Monday, will see prices rise 20% by the middle of next year and increase further by 2012.

Source:

http://news.bbc.co.uk/2/hi/business/6189379.stm