BELARUS NEWS AND ANALYSIS

DATE:

28/12/2006

Gazprom Warns of Wider Cutoffs if Belarus Interferes With Gas

By ANDREW E. KRAMER

MOSCOW, Dec. 27 — Gazprom, the Russian energy monopoly, reacted fiercely on Wednesday to a suggestion from Belarus that it would pull natural gas out of export pipelines rather than pay a higher price for the fuel.

Reversing course from its assurances of Tuesday, Gazprom warned Poland, Lithuania and Germany of possible supply disruptions. About 8 percent of the European Union’s gas imports pass through Belarus.

The country, whose alliance with Russia has turned rocky, both imports natural gas for domestic consumption and transships fuel to markets farther to the West. Its president, Aleksandr G. Lukashenko, is often referred to as Europe’s last dictator.

"We are interdependent," the deputy prime minister of Belarus, Vladimir I. Semashko, said of the two countries’ energy ties in remarks Wednesday on Russian state television. “If I don’t have a domestic gas supply contract, Gazprom won’t have a transit deal.”

Mr. Semashko brushed aside Gazprom’s threat to halt supplies for the domestic market in Belarus. “Gazprom will not reduce the amount of supplies,” he predicted. “With Ukraine there was an attempt like this. After two days, everything fell back into place.”

He was referring to the showdown at the beginning of the year when a price dispute between Ukraine and Russia and a two-day embargo caused jitters across Europe, which relies on Russian gas, especially in the winter.

Gazprom's chief executive, Aleksei B. Miller, responded by issuing a deadline to shut off the gas. “If a contract for supply next year is not concluded, Gazprom will have no basis to supply gas after 10 a.m. on Jan. 1, 2007,” he said in televised remarks. He also suggested that Russia should impose export duties on sales to Belarus, raising the price to $260 per 1,000 cubic meters.

Just on Wednesday, Gazprom had offered Belarus gas for $105 for the same volume, a combination of cash and equity in a key export pipeline.

"You shouldn't expect New Year's presents from Gazprom," the company's spokesman, Sergei V. Kupriyanov, said after the Belarussian implied threat of disrupting Gazprom’s exports to Europe, the source of most of the corporation’s income. “Gazprom is not Santa Claus.”

As in the dispute with Ukraine, the bargaining has become a test of Belarus’s leverage as a transit country for Russian energy and its willingness to risk the energy supplies of its neighbors farther down the pipelines.

"Each of the former republics has a different set of circumstances in terms of what leverage the Russians have, and what relations these countries have with their neighbors,” Jérôme Guillet, a Paris-based banker and an authority on Gazprom’s business practices, said in a telephone interview.

Ukraine, for example, will pay $135 per 1,000 cubic meters next year. By contrast, Georgia, led by a pro-Western government, will pay $235. Belarus currently pays $46.68 per 1,000 cubic meters, the lowest price in the former Soviet Union outside of Russia itself.

About 20 percent of Gazprom's exports to Europe pass over Belarus, and 80 percent via Ukraine. The 25 countries in the European Union, taken together, import 40 percent of their gas from Russia. Gazprom said its average price in Western Europe in the first half of 2006 was $265.

Mr. Kupriyanov of Gazprom said Wednesday that Belarus wanted to pay just $75 per 1,000 cubic meters and asked that Gazprom front the entire $2.5 billion for a 50 percent share in the pipeline company, Beltransgaz. That proposal is “very unlikely” to satisfy Gazprom, he said.

Source:

http://www.nytimes.com/2006/12/28/world/europe/28belarus.html

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