Gazprom says talks with Belarus fail

By Dmitry Zhdannikov and Mikhail Yenukov
Tuesday, December 26, 2006; 7:51 AM

MOSCOW (Reuters) - Russia said on Tuesday a new round of talks with Belarus on gas prices for 2007 had yielded no results, but Europe was safe as Moscow had stockpiled enough gas in Germany and Austria to guard against possible cuts.

Russia's gas monopoly Gazprom said it still hoped for a deal before the New Year to allow Belarus to receive gas in 2007 and Gazprom to transit gas smoothly via the ex-Soviet state to customers in Poland and Germany.

"There was a new round of talks today with Belarus's Deputy Prime Minister (Vladimir) Semashko. We broke up with no agreement," Gazprom spokesman Sergei Kupriyanov told Reuters.

"But we still have a chance to meet and agree before the New Year. Talks have not been suspended," he said. Belarussian officials were not immediately available for comment.

Gazprom has repeatedly warned Belarus it has to pay higher prices from 2007 and share control of its pipelines with the Russian firm or face reduced supplies from the New Year.

Relations between Moscow and its former ally Minsk have hit a rocky patch ahead of the deadline, reviving memories of Gazprom's New Year cutoff of supplies to Ukraine which produced gas shortages in Europe in the dead of winter.

Gazprom, the world's largest gas producer, supplies a quarter of Europe's gas needs. The cutoff to Ukraine prompted European leaders to raise concerns over reliance on Russia.

Like Ukraine, Belarus is a key route for Russian gas to Europe, although it ships much smaller volumes.


A Russian gas industry source said Gazprom has stored much more gas than last year in Germany and Austria able to cover contracts in Europe for several weeks if needed.

Kupriyanov confirmed extra gas had been stockpiled in Europe: "There are no grounds for concern among European consumers," he told state television Vesti 24.

The industry source said extra gas had been pumped into Rheden, the biggest storage facility in Germany, belonging to Wingas, a joint venture of Gazprom and Germany's petrochemical giant BASF. Extra gas had also been stored in its Haidach storage in Austria.

Kupriyanov said Gazprom had made concessions before talks on Tuesday, but that had failed to move Belarussian negotiators.

He said Gazprom had agreed to value Belarus' local pipelines, Beltransgas, at $5 billion, up from its previous estimates of $3-$4 billion.

That would remove obstacles to a joint venture to manage the links, a crucial step for Belarus to secure lower prices.

Gazprom had first sought a fourfold price increase for Belarus to $200 per 1,000 cubic metres. Kupriyanov said Gazprom now wanted $110, of which $80 would be in cash, with the remainder covered by Beltransgas shares over four years.

He said that by comparison, Ukraine would pay $130 for gas in 2007 and Georgia $235. European consumers pay over $250.

Kupriyanov said Semashko offered to pay $75 in cash and asked Gazprom to pay $2.5 billion for half of Beltransgas, also in cash, over the next four years. That would effectively leave the price of Russian gas for Belarus where it stands now.

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