Thu, Dec 28, 2006 - Page 6 News List

Gazprom threatens to halt energy supplies to Belarus

PRICE WAR The Belarusian deputy prime minister left the talks in Moscow without a deal, as the Russian energy company becomes more aggressive on prices


Gazprom, the Russian energy monopoly, threatened on Tuesday to halt natural gas supplies to Belarus if that country did not agree to a large price increase by New Year's Day.

The strong Russian position suggests that Moscow is becoming aggressive in energy pricing even with countries that have been close allies.

Belarus now has the cheapest gas in the former Soviet Union, other than Russia. Gazprom, the world's largest energy company by volume of reserves, is insisting that Belarus pay more than double its current price, though it would still pay less than richer countries in Europe.

Gazprom warned that Belarus was behaving "irresponsibly" in the talks over pricing and a Russian demand to surrender equity in an important export pipeline, and said that such resistance was putting Belarus' energy supply at risk.

The threat was issued almost a year after Gazprom cut off fuel supplies to Ukraine, another important transit country for Russian energy exports, causing intense concern over supply in Western Europe. After three days and a din of criticism, Gazprom turned the gas back on.

In the energy markets now, the Kremlin is dictating terms with greater assertiveness than it has since the collapse of the Soviet Union. Gazprom already owns one of the two major export pipelines that run through Belarus and is negotiating for a share in the second, a move that would tighten the company's bearhug on European supplies.

Gazprom said exports to Poland and Germany through the pipelines would not be at risk, even if Belarus were switched off. The company spokesman, Sergei Kupriyanov, said Gazprom had been stockpiling gas in underground reservoirs in Western Europe to ensure uninterrupted supplies.

"Responsibility for what has taken shape today lies with the Belarusian side," Aleksei Miller, Gazprom's chief executive, said on Tuesday to a Belarusian delegation led by Vladimir Semashko, the deputy prime minister.

"Gazprom and the Russian Federation met you halfway on all issues," Miller said.

Gazprom's tough negotiating suggested an unraveling of the special relationship between Russia and Belarus, which form a loose coalition called a "union state."

"The demand shows Putin is abandoning any myth of the union state," said Lilia Shevtsova, a senior associate at the Carnegie Moscow Center of the Carnegie Endowment for International Peace.

Gazprom's final asking price for gas in Belarus is still among the lowest offered to Russia's neighbors. Gazprom says it is intent on raising prices throughout the former Soviet Union, ending a decade of subsidies.

Semashko left talks in Moscow on Tuesday without a deal.

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