Russia, Belarus Stand Ground in Dispute

Belarusian Yevgenia Lukshits puts wood into a stove to warm her house in the village Gaina, 45 km (28 miles) north of Minsk, Belarus, Tuesday, Dec. 26, 2006. Talks failed on Tuesday between Belarus and the Russian state gas monopoly on Russia's demand for a price increase, and a top company official said Belarus could face a New Year's gas cutoff. (AP Photo/Sergei Grits) (Sergei Grits - AP)

"Gazprom is not Santa Claus," he said in televised comments.

The head of Gazprom's export arm, Alexander Medvedev, said the company would seek to ensure that European customers would not face supply shortages if Belarus hindered the transit of Russian gas.

However, Interfax quoted him as saying that if Belarus were to siphon off the full amount it normally received for its own consumption, "it would be impossible to fully compensate ... especially over a long period."

Russia supplies Belarus about 20 billion cubic meters of gas annually, and Semashko said that 44 billion cubic meters are expected to transit through Belarus to Europe next year.

Early in 2006, Gazprom had to pump additional gas to Europe to make up for supply shortages caused by its cutoff of gas to Ukraine, which was accused of skimming off Russian gas bound for the West.

Belarus now pays $47 per 1,000 cubic meters. Russia supplied gas to ex-Soviet states at below-market prices for years after the 1991 Soviet collapse, but wants to sell all its gas at world prices.

A higher price would be a blow to Belarus' Soviet-style state-run industries, whose financial health _ and, in turn, part of longtime President Alexander Lukashenko's popularity _ depends on cheap gas.

In addition to raising the price, Russia wants Belarus to cede Gazprom a 50 percent stake in its gas distribution system, Beltransgaz.

The politically charged dispute reflects strained relations between Belarus and Russia, which have the closest ties of any two ex-Soviet republics and signed a treaty in the mid 1990s to create a close union.

Russia has supported the authoritarian Lukashenko in the face of severe Western criticism, but relations have been tense under Russian President Vladimir Putin, who angered Lukashenko a few years ago by suggesting an integration scenario under which Belarus would become little more than a Russian province.

Under Gazprom's offer, Belarus would pay $75 per 1,000 cubic meters in cash and $30 in shares of Beltransgaz in 2007. The price would increase gradually and approach a market-style European price _ minus transit fees and export tariffs _ in 2010.