Belarus-Gazprom Gas Talks Reach Impasse

The Associated Press
Tuesday, December 26, 2006; 11:02 AM

MOSCOW -- Talks on Tuesday between Belarus and the Russian state gas monopoly on Russia's demand for a price increase brought no resolution and a top company official said Belarus could face a New Year's gas cutoff.

Russia's Gazprom is demanding Belarus pay $105 per 1,000 cubic meters of gas _ that's well below world market prices, but more than twice the $47 Belarus currently pays. The demanded price would consist of $75 in cash and the remainder in shares of Belarus' natural gas pipeline network, Gazprom officials said.

"Unfortunately, the talks with our Belarusian colleagues ended without result, despite the fact that Gazprom took several major steps to meet the Belarusian side," said Alexander Medvedev, the head of Gazprom's export division.

"In the absence of a contract, there is not and cannot be a basis for the delivery of gas," he said.

Medvedev said any gas shutoff would not affect the supplies of Russian gas to Europe that transit through Belarus. Much of the Russian gas destined for Poland and Germany, among other countries, goes through a pipeline already owned by Gazprom.

A similar price dispute with Ukraine in early 2006 resulted in temporary supply reductions to European customers.

Belarus' Soviet-style state industries depend heavily on low-cost Russian gas. Russia for years subsidized prices for former Soviet states, but increasingly is moving to bring all its sales _ including domestic sales _ to world prices.

Gazprom earlier had demanded Belarus pay $200 per 1,000 cubic meters.

Earlier, in an effort to stress that Gazprom was compromising, company head Alexei Miller said it had agreed to a valuation of $5 billion for the Belarusian network's operator, Beltransgaz, even though it believes the company is worth no more than $3.3 billion.

Kupriyanov said Monday that Belarus was alone among other ex-Soviet republics in seeking to keep subsidized gas rates, which ran counter to Gazprom's policy of shifting to a market basis for its energy sales.

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

Moldova has also agreed to pay 6.3 percent more for Russian natural gas, said Gazprom spokesman Sergei Kupriyanov, according to the Interfax news agency. Next year Moldova will pay $170 per 1,000 cubic meters, up from $160 it pays now, he said.

Belarus is a traditional ally of Russia and the two countries signed a treaty in the mid-1990s designed to create a close union, but ties have been strained under Russian President Vladimir Putin, who angered Belaus President Alexander Lukashenko by suggesting a scenario under which Belarus would become little more than a province of Russia.

The gas dispute has raised fears of a repeat of last year's cutoff of Russian gas supplies to Ukraine, which provoked concern about Europe's reliance on Russian gas, which provides for a quarter of European consumption.

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

Kupriyanov stressed that European consumers have nothing to fear from the dispute with Belarus, Interfax reported.

© 2006 The Associated Press