Russia/Belarus: Possible Gas War Looms
December 27, 2006 (RFE/RL) -- Another
New Year, another gas crisis between Russia and one of its
neighbors. Russia's natural-gas monopoly Gazprom has
said that it will cut fuel supplies to Belarus if Minsk does not accept a steep
price increase by January 1.
But with the deadline just days away,
Minsk hit back today with an implicit ultimatum of its own.
Returning from failed talks in
Moscow, Belarusian Deputy Prime Minister Uladzimir Syamashka said gas supplies
to Belarus and Gazprom's rights to transit its gas across the country are
"mutually dependant." The message being that if Gazprom doesn't given Belarus
the deal it seeks, Belarus may refuse to sign a contract allowing the company to
pump gas across its territory.
Speaking in Moscow on December 27, Gazprom
spokesman Sergei Kupriyanov said the company has no plans to back
"One shouldn't expect such Christmas presents from Gazprom,"
Kupriyanov said. "After all, Gazprom isn't Santa Claus."
percent of Gazprom's exports to Western Europe transiting Ukraine and only 20
percent through Belarus, Minsk's attempt to pressure Moscow looks
"It won't cause serious damage to Europe," said Jonathan
Stern, director of the gas program at Britain's Oxford Institute For Energy
Studies. "It will cause serious damage to the Belarusian economy if it goes on
for more than a few days because their economy is so heavily gas dependant.
Europe not only at the moment is warm, but also Gazprom has gas stored in Europe
and can, if it needs to, put more gas through the Ukrainian
Gazprom initially demanded that Belarus pay $200 per
1,000 cubic meters of gas in 2007, more than a fourfold increase over the $47
Minsk is currently paying.
"I think the Russians have
decided enough is enough." -- analyst Stern
It has since modified the
offer, asking for $105 per 1,000 cubic meters. As part of what Gazprom calls its
"final offer," every 1,000 cubic meters of gas would cost Belarus $75 in cash
and $30 in shares of Beltranshaz, the Belarusan state gas company whose
pipelines carry Russian gas to Europe.
Belarus is insisting on a straight fee
of $75 per 1,000 cubic meters, with no Beltranshaz shares.
has supplied Belarus with natural gas at heavily subsidized prices since the
1991 Soviet breakup. Switching to market rates now would deliver a severe
economic -- and potentially political -- blow, as President Alyaksandr
Lukashenka has relied on cheap Russian energy to subsidize his Soviet-style
Paying The Piper
subsidizing Lukashenka has apparently become more costly than it is worth.
Moreover, Belarus has been reluctant to part with shares in Belatranshaz, and
has been asking more for them than Moscow wants to pay.
subsidies, with the price of gas now in Europe, these subsidies have become
enormous -- in the case of Belarus amounting to perhaps $4-5 billion a year,"
Stern said. "That starts to be an awful lot of money and with no real progress
on infrastructure sharing and a deteriorating political relationship, I think
the Russians have decided enough is enough."
The gas dispute with
Belarus is the last in a series of negotiations Gazprom has conducted as 2006
draws to a close. And the message the natural-gas giant is sending to its
ex-Soviet clients is clear -- the era of cheap energy is over.
Georgia and Moldova have both
agreed to pay higher rates in 2007.
"The era of subsidy, which
was really a hangover from the former Soviet Union, is drawing to a close,"
Stern said. "They will do this as gradually as they can, to have as little
impact as they can, but they are very firm that nobody is going to get
subsidized gas prices from, at least, the end of 2007. So this is the last year
of any subsidy whatsoever."
Georgia, which also faced a New Year's
cutoff, agreed on December 22 to a rate hike that will see it pay Gazprom $235
per 1,000 cubic meters of gas in 2007. Moldova has agreed to pay $170, with the
price rising to European-level market price by 2011. Moldova also agreed to pay
for part of its gas imports by handing over shares in gas concerns, including
its distribution system.
Azerbaijan, however, has rejected
Gazprom's demand that it pay $235 per 1,000 cubic meters, up from the $110 that
Baku currently pays. Azerbaijan says it plan to use its own energy reserves and
is also in talks with Iran about possible alternative supplies.
Copyright (c) 2006 RFE/RL, Inc. Reprinted with the permission of Radio Free Europe/Radio Liberty, 1201 Connecticut Ave., N.W. Washington DC 20036. www.rferl.org
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