BELARUS NEWS AND ANALYSIS

DATE:

27/12/2006

Russia, Belarus Stand Ground in Dispute

By STEVE GUTTERMAN
Associated Press Writer

MOSCOW (AP) -- Russia and Belarus stood their ground Wednesday in a dispute over natural gas prices, with Russia's state-run gas monopoly OAO Gazprom setting the clock ticking toward a Jan. 1 supply cutoff if its neighbor does not agree to pay more.

Belarus warned that a suspension of supplies could jeopardize deliveries across its territory to Gazprom clients in European Union member states - a threat targeting Russian concerns of a repeat of the blow its image suffered when a cutoff of deliveries to Ukraine a year ago led to brief supply disruptions in Europe.

Gazprom, which is demanding that Belarus pay more than twice the current price for gas next year and hand over a 50 percent stake in its gas distribution system, refused to back down despite the threat from Minsk.

"If a gas supply contract for next year is not reached, Gazprom will have no grounds for deliveries of gas to Belarus as of 10 a.m. Moscow time (0700GMT) on Jan. 1, 2007," Gazprom chief Alexei Miller said in televised comments.

Miller said that Gazprom would supply gas for European consumers to the Russia-Belarus border in full compliance with its contracts. But he also said the company sent letters to Germany, Poland and Lithuania informing them about "the developing situation regarding gas supplies to Belarus," suggesting concern about disruptions in deliveries to those countries.

About 30 percent of Russian gas supplies to Europe transit through Belarus, much of it to Germany, Poland and Lithuania.

Gazprom officials had threatened to halt supplies meant for Belarusian consumption if no contract was signed before the existing one expires Dec. 31, but Miller's comments marked the first time the company set an hour. He said fresh talks Wednesday had failed, blaming what he called Belarus' "destructive position."

The remarks came after Belarusian First Deputy Prime Minister Vladimir Semashko shrugged off the threat of a suspension, warning that Gazprom relies on Belarus for transit to Europe and could not risk the international criticism it faced during the Ukraine dispute.

Russia, the world's largest gas producer, provides a quarter of Europe's gas consumption.

"I don't think Gazprom will resolve to cut off gas to Belarus - they shouldn't step on the same rake twice," he said.

"We are interconnected," Semashko said after unsuccessful talks Tuesday with Miller. "I have no contract with Mr. Miller on deliveries to Belarus from Jan. 1, and Mr. Miller has no contract on transit through Belarus."

Gazprom spokesman Sergei Kupriyanov said the company, which initially insisted Belarus pay $200 per 1,000 cubic meters of gas next year but is now asking for $105, is not prepared to go lower.

"Gazprom is not Santa Claus," he said in televised comments.

The head of Gazprom's export arm, Alexander Medvedev, said the company would seek to ensure that European customers would not face supply shortages if Belarus hindered the transit of Russian gas.

However, Interfax quoted him as saying that if Belarus were to siphon off the full amount it normally received for its own consumption, "it would be impossible to fully compensate ... especially over a long period."

Russia supplies Belarus about 20 billion cubic meters of gas annually, and Semashko said that 44 billion cubic meters are expected to transit through Belarus to Europe next year.

Early in 2006, Gazprom had to pump additional gas to Europe to make up for supply shortages caused by its cutoff of gas to Ukraine, which was accused of skimming off Russian gas bound for the West.

Belarus now pays $47 per 1,000 cubic meters. Russia supplied gas to ex-Soviet states at below-market prices for years after the 1991 Soviet collapse, but wants to sell all its gas at world prices.

A higher price would be a blow to Belarus' Soviet-style state-run industries, whose financial health - and, in turn, part of longtime President Alexander Lukashenko's popularity - depends on cheap gas.

In addition to raising the price, Russia wants Belarus to cede Gazprom a 50 percent stake in its gas distribution system, Beltransgaz.

The politically charged dispute reflects strained relations between Belarus and Russia, which have the closest ties of any two ex-Soviet republics and signed a treaty in the mid 1990s to create a close union.

Russia has supported the authoritarian Lukashenko in the face of severe Western criticism, but relations have been tense under Russian President Vladimir Putin, who angered Lukashenko a few years ago by suggesting an integration scenario under which Belarus would become little more than a Russian province.

Under Gazprom's offer, Belarus would pay $75 per 1,000 cubic meters in cash and $30 in shares of Beltransgaz in 2007. The price would increase gradually and approach a market-style European price - minus transit fees and export tariffs - in 2010.

Source:

http://customwire.ap.org/dynamic/stories/B/BELARUS_RUSSIA_GAS_WAR?SITE=NDBIS&SECTION=HOME&TEMPLATE=DEFAULT&CTIME=2006-12-27-14-54-29