Belarus to stop flow of gas to Europe in dispute with Russian gas company

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By Courtney Weaver and Roman Olearchyk
Tuesday, June 22, 2010; 1:56 PM

MOSCOW -- Belarus announced Tuesday that it will cut off the flow of all gas through its territory to Europe as President Alexander Lukashenko warned that the dispute between his country and Gazprom, the Russian gas monopoly, has escalated into a full-scale "gas war."

Lukashenko's comments came hours after Russia increased the level of its gas cuts to Belarus from 15 to 30 percent. Gazprom has said it will cut up to 85 percent of supplies if Belarus does not pay the $192 million the state-controlled Russian company says it owes for gas deliveries.

Belarus says it will not resume transit of the gas until Gazprom pays it the $260 million Belarus says the company owes in transit fees.

"[Gazprom] for the past half a year has not paid us one kopek," Lukashenko told reporters in Minsk after a meeting with Sergei Lavrov, Russia's foreign minister. "We don't owe Gazprom. Gazprom owes us $70 million," or the difference between the $260 million and $192 million, he said.

Despite the escalation in the conflict, analysts said the spat is not as serious as Gazprom's two-week clash with Ukraine in January 2009, because Belarus supplies just 20 percent of Europe's gas, compared with the 80 percent supplied by Ukraine, and because less gas is used in the summer.

Sergei Kupriyanov, Gazprom's spokesman, said the company would have no trouble fulfilling its contractual obligations, given that Europe maintains underground storage facilities. In addition, Kiev pledged Tuesday to help compensate for any shortages by pumping more Russian gas to Europe.

"We have the capability to pump 15, 20, 30 billion cubic meters more gas," Mykola Azarov, Ukraine's prime minister, said. "If there is such a need, the Ukrainian gas pipeline system will fulfill agreements on the supply of gas to Europe."

Kupriyanov told reporters in a conference call that the transit fees question was a "technical issue" that had been "raised by the Belarusan side to have leverage in the negotiations."

"We're trying to pay for the transit, but all this time the Belarusan side is trying to increase the tariff outside the contract, which brings us to this kind of dead end," he said.

Lukashenko asserted that Belarus paid in full for its gas orders for May, at the higher price requested by Gazprom, but Kupriyanov said the company has not received the payment.

Ukraine insists it is neutral in the Moscow-Minsk spat but has simultaneously used the moment to call on Russia and Brussels to drop alternative pipeline projects that would bypass Ukrainian turf and instead invest more than $10 billion in the yet-to-be built South Stream pipeline project stretching across the Black Sea.

"We have underlined for the Russian side that our gas pipeline system needs modernization," Azarov said on Tuesday. "We have, for example, offered a joint venture on equal terms with the European side, too."

-- Financial Times

Olearchyk reported from Kiev, Ukraine.


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