BELARUS NEWS AND ANALYSIS

DATE:

31/12/2006

Russia, Belarus resume gas talks as clock ticks toward cutoff

The Associated Press

MOSCOW: With just hours to go before a threatened cutoff of natural gas to Belarus, Russia's gas monopoly and Belarusian officials on Sunday resumed tense talks over Russia's demand for a 125-percent rate hike.

Cutting off gas to Belarus would leave the country of 10 million people scrambling to find alternative ways of cooking and keeping warm and could shut down the country's energy-intensive heavy industries. Much of the Russian gas consumed by Western Europe passes through Belarus, and concerns were high that a cutoff could sap European supplies.

Belarusian First Deputy Prime Minister Vladimir Semashko flew to Moscow Sunday morning for the talks with OAO Gazprom. On Saturday, he said Belarus would pay US$100 (?76) per 1,000 cubic meters of gas - US$5 (?3.80) less than Gazprom has demanded.

Semashko's statement had implied an agreement was reached, but Gazprom spokesman Sergei Kupriyanov said no contract had been signed and indicated the company was not inclined to bargain.

"This price is already better than for Armenia, with whom we agreed about supplying gas a year ago," he said on Russia's NTV television.

Semashko and other Belarusian officials have suggested they could hinder the transit of gas across Belarus to Europe if Gazprom halts supplies meant for Belarusian customers.

Belarus's authoritarian President Alexander Lukashenko, whose grip on the nation of 10 million could be weakened by an increase in the price for Russian gas, accused Gazprom on Friday of blackmail.

The politically charged dispute reflects strained relations between Belarus and Russia, whose close ties go back centuries but have been increasingly tense in recent years as Russian President Vladimir Putin's Kremlin has apparently tired of providing political and economic support for Lukashenko.

Gazprom, which has been raising prices closer to market levels after selling gas cheaply to ex-Soviet republics for years, is demanding Belarus pay US$105 (?80) per 1,000 cubic meters in 2007 - US$75 (?57) in cash and US$30 (?23) in shares of its gas pipeline operator, Beltransgaz.

The price would increase annually and reach a market-style European price - minus the transit cost and export duties - by 2011. For the next four years, Belarus would pay a portion of the cost in shares of Beltransgaz.

Semashko, however, said Belarus would pay US$100 (?76) in cash in 2007 and that Gazprom would pay for half of Beltransgaz in cash. He said the gas price would increase by US$11 (?8) annually after 2007, reaching US$144 (?109) in 2011 - far less than the US$200 (?152) Gazprom officials initially demanded for next year and have suggested would be the market price for Belarus today.

Semashko also said the fee for transit of Russian gas would be increased next year from US$0.75 (?0.57) per 100 kilometers to US$1.65 (?1.25). Gazprom officials have suggested they are prepared to pay twice the current fee.

The European Union and Germany, which receive some of their Russian gas via Belarus, have urged the neighbors to resolve their dispute quickly and guarantee supplies. Europe is wary of a repeat of the brief supply shortages that ensued when Gazprom halted deliveries to Ukraine during a similar dispute a year ago.

Gazprom has warned Belarus not to siphon gas from the Russian-owned Yamal-Europe pipeline, which carries about two-thirds of the some 44 billion cubic meters of gas that transits Belarus annually en route to Europe - mainly Germany, Poland and Lithuania.

Kupriyanov said Saturday that Gazprom was sending inspectors to monitor connections linking Yamal-Europe with the Belarusian pipeline system in a bid to ensure no gas is siphoned, and also inviting "independent international observers" to help monitor volume in the pipeline.

Earlier this month, the Russian Cabinet decided to raise customs duties on oil exports to Belarus, which will deprive its Soviet-style economy of profits it has reaped by exporting oil products made of cheap Russian oil.

A large Belarusian industrial concern that includes chemical plants, Belneftekhim, has suspended its 2007 contracts to buy oil from Russian companies and will seek alternative suppliers because the customs duties will make purchases from Russia too costly, its director Alexander Borovsky said.

Source:

http://www.iht.com/articles/ap/2006/12/31/europe/EU_GEN_Russia_Belarus_Gas_War.php

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