BELARUS NEWS AND ANALYSIS

DATE:

27/12/2006

New Russian Gas Crunch?

After a breakdown in price talks, Gazprom is threatening to ring in 2007 by turning off gas supplies to Belarus

by Andrew Rettman

Russia is planning to turn off gas supplies to EU transit state Belarus on New Year's day after price talks broke down on Tuesday (26 December), but says EU energy flows will be safe this winter no matter what happens.

"The contract for supplies of gas will expire six days from now," Gazprom spokesman Sergei Kupriyanov stated after the negotiations, Polish and Russian media report. "The position of Belarus is irresponsible and puts under a question mark gas supplies to the whole country."

The stark warning, issued as temperatures in eastern Europe dropped below zero, came after Minsk declined a Russian offer for Belarus to pay $75 per thousand cubic metres of gas in 2007 instead of $47 and to give up shares in its gas champion, Beltransgaz.

Belarus transits 20 percent of Russian gas to the EU with the vast majority going through the Yamal trunk pipeline to Poland, Germany, the Netherlands, France and Belgium while almost 100 percent of Latvia and Lithuania's gas supply relies on smaller, Beltransgaz pipes.

Experts are divided on how a Belarus gas shutdown could hit the EU, with Poland's Gazeta Wyborcza citing analysts who say the Russian-owned Yamal pipeline would keep flowing, leaving just Riga and Vilnius in the cold.

But Polish daily Rzeczpospolita writes that when Russia shut down supplies to Beltransgaz for one day in 2004, Belarus began using EU transit gas and caused a crunch that forced several Polish companies to halt work.

"All volumes of gas on our export contracts will be delivered to the Belarusian border on 1 January even if we sign no contract with Belarus," Gazprom's export chief Alexander Medvedev said, adding "I do not want to forecast Belarus' behaviour in this case."

Gazprom also pointed out that Germany and Austria have built up gas reserves in case of any fresh supply problem, after Russia's price row with Ukraine - which transits 80 percent of Russia's EU gas exports - saw large-scale EU energy disruption last winter.

Ukraine safe

Russian president Vladimir Putin visited Kiev last Friday to underline that Russia-Ukraine-EU supplies are safe, despite the sudden death of Turkmenistan leader Saparmurat Niyazov, with Turkmen gas making up an important part of the Russia-Ukraine gas mix.

Turkmenistan's acting government under Gurbanguly Berdymukhammedov has upheld an old Ukraine gas deal at less than $95, but with presidential elections set for 11 February pro-democratic opposition leader Nurmuhammed Khanamov is hinting at an even better offer.

"Our party has chosen a democratic path for the country's development and we ask the Ukrainian government to assist us in this," Mr Khanamov said, Russian news agency Ria Novosti reports. "We promise a review of natural gas prices and undisrupted deliveries."

EU to push nuclear

Meanwhile, the EU will on 10 January unveil details of a strategy to become less dependent on increasingly unpredictable suppliers, with French paper Les Echos citing a draft version of the January "Strategic Review" as dedicating a whole page to the promotion of extra nuclear capacity in Europe.

"[Nuclear energy] is less vulnerable to price fluctuations than coal or gas," the draft text states. "Moreover, it is available in sufficient quantities for several decades and spread across several regions worldwide."

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Source:

http://www.businessweek.com/globalbiz/content/dec2006/gb20061227_801200.htm?chan=globalbiz_europe_more+of+today's+top+stories