Russia Threatens Neighbor Over Gas

By Henry Meyer
Associated Press
Tuesday, December 26, 2006

MOSCOW, Dec. 25 -- Gazprom, Russia's state natural gas monopoly, threatened neighboring Belarus on Monday over its refusal to agree to tough conditions on a price increase, saying its supplies could be at risk on Jan. 1.

Raising the specter of a repeat of last year's New Year's dispute with Ukraine, which saw gas supplies cut off briefly, Gazprom spokesman Sergei Kupriyanov said Belarus was insisting on maintaining subsidized prices next year, comparable to domestic tariffs inside Russia.

"The position which they have adopted today is absolutely irresponsible and threatens Belarus's energy supplies," Kupriyanov said in televised remarks. The Interfax news agency quoted him as saying, "The current contract for gas deliveries to Belarus expires in six days." .

The Russian company has demanded that Belarus pay $200 per 1,000 cubic meters of gas -- four times the current price.

Kupriyanov said later Monday that Gazprom would agree to $80 per 1,000 cubic meters if Belarus handed over 50 percent of its state-controlled gas transport network, reported RIA Novosti, a Russian state news agency.

Kupriyanov said Belarus was alone among a group of former Soviet republics in seeking to keep subsidized gas rates, which runs counter to Gazprom's policy of switching all its energy sales to a market basis.

Georgia, whose Western-leaning leadership has accused Russia of using its energy might to apply political pressure, agreed Friday to pay $235 per 1,000 cubic meters for its Russian gas imports under threat of a gas freeze at the new year.

Belarus's president has warned that increasing his country's gas prices to $200 per 1,000 cubic meters would be catastrophic for Belarus's Soviet-style, centrally planned economy.

In exchange for a smaller price increase, Gazprom has proposed taking a major stake in Beltransgaz, the Belarusan transport network whose pipelines handle a significant part of Russia's exports of gas to the rest of Europe.

The two countries have disagreed sharply on a valuation for Beltransgaz.

Belarus is a traditional ally of Russia, but its authoritarian leader, Alexander Lukashenko, has fallen out with Russian President Vladimir Putin since refusing to incorporate his country into Russia under a treaty the two states signed in the 1990s but never implemented.

The cutoff of Russian gas supplies to Ukraine -- the major transit route for Russia's natural gas exports to Europe -- also disrupted deliveries to several European countries. That provoked major concern about Europe's reliance on Russian gas, which accounts a quarter of European consumption.

A fresh energy dispute involving Belarus would heighten the European Union's doubts about the reliability of Russia as an energy supplier.

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