BELARUS NEWS AND ANALYSIS

DATE:

26/12/2006

Russia, Belarus in talks on gas supplies amid threats of halt in deliveries

The Associated Press

MOSCOW: Talks on Tuesday between Belarusian authorities and the Russian state gas monopoly Gazprom led to no agreement on gas prices, the company said, raising the possibility that supplies to the ex-Soviet republic could be suspended in the New Year.

Gazprom wants to raise the price the neighboring country pays and has suggested it could halt deliveries unless an agreement is reached by Jan. 1, when the current contract runs out.

The monthslong price dispute has raised the specter of a repeat of the suspension of gas supplies to Ukraine at this time last year and has strained relations between Russia and Belarus, which have the closest ties of any two ex-Soviet republics.

With time ticking away, Gazprom spokesman Sergei Kupriyanov said no agreement was reached in talks in Moscow led by company head Alexei Miller and Belarusian Deputy Prime Minister Vladimir Semashko.

He said there is still time to reach an agreement, but added that the outcome of Tuesday's talks was "quite alarming" - suggesting the positions of the two sides are far from agreement.

Gazprom, which had been asking for US$200 per 1,000 cubic meters, has offered to reduce that to US$110, of which Belarus would pay US$80 in cash and the rest by handing over 50 percent of its state-controlled gas transport network, he told The Associated Press.

The shares in the pipeline network, Beltransgaz, would help pay for supplies through 2010, he said. Belarus wants to continue paying roughly the amount it is paying now, about US$47, he said.

In the latest hint of a possible supply cutoff, Gazprom chief Alexei Miller said in televised comments that "the responsibility for the situation ... lies entirely with the Belarusian side."

In an effort to stress that Gazprom was compromising, Miller said it had agreed to a valuation of US$5 billion (?3.8 billion) for the Belarusian network's operator, Beltransgaz, even though it believes the company is worth no more than US$3.3 billion (?2.50 billion).

Kupriyanov said Monday that Belarus was alone among other ex-Soviet republics in seeking to keep subsidized gas rates, which ran counter to Gazprom's policy of shifting to a market basis for its energy sales.

Georgia, whose Western-leaning leadership has accused Russia of using its energy might to apply political pressure on it, agreed Friday to pay US$235 (?178) per 1,000 cubic meters for its Russian gas imports under threat of a gas freeze on New Year.

Moldova has also agreed to pay 6.3 percent more for Russian natural gas, Kupriyanov said, according to the Interfax news agency. Next year Moldova will pay US$170 (?130) per 1,000 cubic meters, up from US$160 (?120) it pays now, he said.

Belarusian President Alexander Lukashenko had warned that raising the price to US$200 (?151) per 1,000 cubic meters would be catastrophic for the country's Soviet-style, centrally planned economy.

A stake in Beltransgaz - whose pipeline network handles a significant part of Russia's European-bound gas exports, specifically to Poland, Lithuania and Germany - would give Russia more leverage over Belarus.

Belarus is a traditional ally of Russia and the two countries signed a treaty in the mid-1990s designed to create a close union, but ties have been strained under Russian President Vladimir Putin, who angered Lukashenko by suggesting a scenario under which Belarus would have become little more than a province of Russia.

The gas dispute has raised fears of a repeat of last year's cutoff of Russian gas supplies to Ukraine, which disrupted deliveries to several European countries and provoked major concern about Europe's reliance on Russian gas, which provides for a quarter of European consumption.

A fresh energy dispute involving Belarus would heighten the EU's doubts about the reliability of Russia as an energy supplier.

Kupriyanov stressed that European consumers have nothing to fear from the dispute with Belarus, Interfax reported.

Source:

http://www.iht.com/articles/ap/2006/12/26/business/EU_FIN_Russia_Russia_Gas_Talks.php

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