BELARUS NEWS AND ANALYSIS

DATE:

29/12/2006

Belarus delegation heads for gas talks in Moscow

By Andrei Makhovsky

MINSK (Reuters) - A Belarus delegation headed for Moscow on Friday in a last-minute attempt to settle a gas pricing row with Russia, which could threaten supplies to Europe in the New Year.

Russia's gas monopoly Gazprom (GAZP.MM: Quote, Profile , Research), the main Russian protagonist in the dispute, would not speculate on whether it expected Belarus to back down and share pipelines and pay higher prices for gas from 2007 as it demanded.

A Gazprom source, who did not wish to be identified, sought to dampen expectations, saying: "We may find out that they are flying here to say that they have got nothing new to say."

A Belarus Energy Ministry official told Reuters before the delegation left Minsk: "The aim is to sign a contract. We hope to do it before the New Year."

The official declined to say whether Minsk was prepared to offer concessions to Gazprom, which said on Thursday it would not change its latest offer and wanted Belarus to pay $105 per 1,000 cubic meters from 2007, up from $46 now.

Russia, with huge energy reserves, supplies a quarter of Europe's gas to more than 20 countries with about 80 percent of this going through Ukraine and the rest via Belarus.

Although the volumes of Russian natural gas going to Europe via Belarus are relatively small, the European Commission and Germany have urged the two sides to settle their differences quickly to avoid any chance of disruption.

Russia has threatened to cut off gas supplies to its former Soviet ally, which lies to its west, at 0700 GMT on January 1. As the dispute has escalated, Belarus has threatened retaliation by disrupting supplies crossing its territory to Europe.

This threat of retaliation was voiced by deputy energy minister Eduard Tovpenets who was heading the Belarus delegation on Friday.

The row with Belarus, hitherto a loyal Kremlin ally even as other ex-Soviet republics sought to move out of Moscow's orbit, is part of a wider drive by Gazprom to bring its prices in the former Soviet Union closer to European levels.

Other price disputes with Ukraine and Georgia have been settled.

A similar row with Ukraine disrupted transit supplies of Russian gas to Europe in January 2006.

JOINT ECONOMIC ZONE

Minsk argues it should pay much lower prices because Belarus and Russia are part of a joint economic zone. By comparison, Gazprom's customers in Europe pay more than $250.

Moscow says Minsk has no right to take action against supplies to Europe since, unlike Belarus's local pipelines, the transit links to Europe belong to Gazprom.

Russia was heavily criticised by politicians in the European Union and the United States after last year's cuts to Ukraine.

Unlike the pro-Western leadership in Ukraine, Belarus's President Alexander Lukashenko, accused in the West of crushing human rights, has expressed loyalty to the Kremlin.

Relations have deteriorated as a result of what analysts say is Russian President Vladimir Putin's distaste for Belarus's Soviet-style economic policy and reluctance to share assets.

Gazprom also often seeks lucrative assets in neighboring states and the dispute with Minsk has centered on Beltransgas, a local pipeline network.

The gas monopoly agreed to value the network close to Belarus's estimates of $5 billion and asked Minsk to pay $75 per 1,000 cubic meters of gas in cash with the rest being covered by half of Beltransgas's shares over four years.

Gazprom's spokesman Sergei Kupriyanov said late on Thursday Gazprom's main goal was to receive a fair price for its gas.

Source:

http://today.reuters.com/news/articlebusiness.aspx?type=ousiv&storyID=2006-12-29T130138Z_01_L29788177_RTRIDST_0_BUSINESSPRO-RUSSIA-BELARUS-GAS-DC.XML&from=business

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