BELARUS NEWS AND ANALYSIS

DATE:

27/12/2006

Belarus threatens EU gas supply

Minsk - Belarus said on Wednesday that about 20% of Russian natural gas deliveries to Europe could be threatened if Russian group Gazprom cuts gas to Belarus next week over a pricing dispute.

Continued transit of Russian gas across Belarus to western European clients depended on Gazprom agreeing to supply Belarus' domestic needs, Belarussian First Deputy Prime Minister Vladimir Semashko said.

"We are mutually dependent: We have no contract on gas supplies, and they (Gazprom) do not have a contract for transit, and this amounts to 22% of Gazprom's exports," Semashko said.

Gazprom wants Belarus to pay more than double the current price from 2007 onward and is threatening to cut supplies at the start of the year, next Monday, if no deal is reached.

Semashko said that Gazprom's reliance on Belarus for transit meant the cut-off would not happen.

'There will be gas'

"On January 1, 2007, there will be gas in Belarus," he said.

But Gazprom spokesperson Sergei Kupriyanov reiterated the New Year's deadline.

"The current contract runs out in four days. Russian gas deliveries to Belarus in 2007 are only possible on condition of a new contract being reached," he was quoted as saying by Interfax.

He accused Belarus of preparing to siphon off gas intended for western Europe in case of Gazprom shutting down the country's own supplies.

The standoff between Belarus and the Russian state gas monopoly closely resembles a row this time last year when Ukraine refused a demand for a fourfold price increase.

Gazprom briefly cut supplies to Ukraine on New Year's Day, with knock-on effects for European consumers further down the the supply line during one of the coldest winters recorded in Europe.

Sufficient reserves

In Brussels, the European Commission remained calm, saying that EU reserves were sufficient to weather any shortfall.

Germany expressed "understanding" for Moscow's position, but Poland's foreign ministry said the dispute was a threat to the country.

"This problem poses a threat to us and this is why we have had heated debate in the past few months about Polish-Russian relations and relations between Europe and Russia," said the Polish ministry.

About 80% of the Russian gas piped to Europe transits through Ukraine and about 20% through Belarus.

Official EU data shows that the 25-nation bloc relies on Russia for more than 40% of its gas imports and over 30% of its oil imports.

The dispute between Gazprom and Belarus centres not just on Gazprom's demand for higher gas fees in the ex-Soviet republic, but the Russian monopoly's bid to take control of Belarus' pipeline network.

Belarus currently pays Gazprom $46.68 per 1 000 cubic metres of gas and Gazprom originally demanded a hike to $200 - unless Belarus agreed to sell 50% of its pipeline operator Beltransgaz.

A strategetic foothold

This would give the Russian state-owned giant an important strategic foothold on the European Union's eastern border.

On Tuesday, Gazprom said it was prepared to scale back and charge a total of $105 per 1 000 cubic metres - $75 per 1 000 cubic metres in cash payments, plus the equivalent of another $30 in shares of Beltransgas.

Semashko said on Wednesday that Belarus, which is in a loose economic union with Russia and is heavily dependent on trade with its giant neighbour, was ready only to pay $75 for the gas, without any sale of Beltransgas shares.

According to analysts in Belarus, Gazprom's main aim is control of Beltransgas.

"In getting control of the gas pipelines, Russia would increase its economic and political influence on Belarus," said economist Yaroslav Romanchuk.

But commentator Tatyana Manyonok predicted that Gazprom would shy away from turning off the gas taps to Belarus on New Year's Day.

"Gazprom already has such a poor reputation in Europe in terms of being a reliable supplier and it will be afraid that Belarus will take from the transit gas."

Source:

http://www.fin24.co.za/articles/companies/display_article.aspx?Nav=ns&lvl2=comp&ArticleID=1518-1783_2049117

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