BELARUS NEWS AND ANALYSIS

DATE:

28/12/2006

Gazprom Warns Belarus Not to Siphon Gas

By STEVE GUTTERMAN

MOSCOW - Russia's natural gas monopoly warned Belarus on Thursday against siphoning gas from the main pipeline across its territory if it goes ahead with a threatened Jan. 1 supply cutoff.

The European Union and Germany, meanwhile, urged the neighbors to resolve their price dispute quickly and guarantee supplies.

State-controlled OAO Gazprom has demanded that Belarus buy gas at more than twice the current price next year and pay for the increase in part by ceding a half-share of its own government-controlled pipeline operator.

Belarusian officials have countered by suggesting they would siphon Russian gas destined for Europe if Gazprom carries out its threat to shut off supplies meant for Belarus.

The dispute echoes last year's conflict with Ukraine, which led to brief supply shortages in some European nations after Gazprom suspended deliveries to Ukraine and accused it of siphoning gas meant for transit.

The gas war with Ukraine deepened European concerns about Russia's reliability as an energy supplier. Gazprom spokesman Sergei Kupriyanov said the company will do everything it can to fulfill its obligations to European customers.

Russia provides for a quarter of Europe's natural gas, with about 30 percent going through Belarus.

He warned Belarus not to disrupt flows through the Yamal-Europe pipeline, which carries about two-thirds of the Russian gas that transits Belarus on the way to European countries _ mainly Germany, Poland and Lithuania.

Yamal-Europe carries about 28 billion cubic meters of Russian gas per year out of the total of 44 billion that transit Belarus, according to Beltransgaz, the Belarusian pipeline operator whose pipes carry the other 16 billion cubic meters.

While Gazprom owns Yamal-Europe, it is under the day-to-day operation of Beltransgaz.

"Yamal-Europe is exclusively an export pipeline," Kupriyanov said, adding that its connections with the rest of the Belarusian system are sealed and that any attempt to disrupt the flow by Belarus would be detected at the company's headquarters in Moscow.

"We will find a way to ensure the unimpeded transit of our gas through our pipeline," he said.

Valery Nesterov, an oil and gas analyst at the Troika Dialog brokerage in Moscow, said the Belarusians could siphon off as much gas as they wanted to, and dismissed Gazprom's statement as "propaganda."

With only three days left before Gazprom's threatened gas cutoff, Kupriyanov said late Thursday that talks were at a deadlock.

"As of today, there is no progress in the negotiations," he said on state television.

EU Energy Commissioner Andris Piebalgs said the EU was "following the situation very closely since it may affect gas supplies to the European Union," and called for a swift agreement "that does not put in question gas transits to the EU."

German Economy Minister Michael Glos urged the sides to "to reach a workable agreement as soon as possible ... and thus provide proof of their reliability as delivery and transit countries."

Glos' ministry said, however, that there was no threat to gas supplies in Germany, in view of gas companies' storage capacities and the fact that relatively little of Germany's gas _ about 30 percent _ crosses Belarus.

E.On Ruhrgas AG, Germany's largest importer of natural gas, said its reservoirs are full, and that most of its Russian gas comes through Ukraine.

Ukraine, eager to make an impression in Europe and mend troubled ties with Russia, offered Thursday to help Russia supply gas to European consumers by increasing transit volumes if deliveries are disrupted.

Belarus now pays $47 per 1,000 cubic meters of Russian gas and was expected to use 21 billion cubic meters next year. Gazprom, which has been raising prices closer to market levels after selling gas cheaply to ex-Soviet republics for years, is demanding Belarus pay $105 in 2007.

Under Gazprom's offer, the price would gradually increase, approaching European levels in 2010, and Belarus would pay part of the cost by ceding 50 percent of Beltransgaz _ giving Moscow more control over exports and domestic use.

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

A service of the Associated Press(AP)

Source:

http://www.nctimes.com/articles/2006/12/28/ap/business/d8ma0bao0.txt

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