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 failed on Tuesday between Belarus and the Russian state gas monopoly on Russia's demand for a price increase, and a top company official said Belarus could face a New Year's gas cutoff.

Russia's Gazprom is demanding Belarus pay US$105 (?80) per 1,000 cubic meters of gas - well below world market prices, but more than twice the US$47 (?36) Belarus currently pays. The demanded price would consist of US$75 (?57) in cash and the remainder in shares of Belarus' natural gas pipeline network, Gazprom officials said.

"Unfortunately, the talks with our Belarusian colleagues ended without result, despite the fact that Gazprom took several major steps to meet the Belarusian side," said Alexander Medvedev, the head of the company's export division.

"In the absence of a contract, there is not and cannot be a basis for the delivery of gas," he said.

Medvedev said any gas shut-off would not affect the supplies of Russian gas to Europe that transit Belarus. Much of the Russian gas destined for Poland and Germany, among other countries, goes through a pipeline already owned by Gazprom.

A similar price dispute with Ukraine in early 2006 resulted in temporary supply reductions to European customers.

Belarus' Soviet-style state industries depend heavily on low-cost Russian gas. Russia for years subsidized prices for former Soviet states, but increasingly is moving to bring all its sales - including domestic sales - to world prices.

Gazprom earlier had demanded Belarus pay US$200 per 1,000 cubic meters.

Earlier, in an effort to stress that Gazprom was compromising, company head Alexei 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, said Gazprom spokesman Sergei Kupriyanov, 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.

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 new energy dispute involving Belarus would heighten the European Union'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_Belarus_Gas_Talks.php