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Russia: Gazprom Plans To Cut Gas Supplies To Belarus

Russia's Gazprom plans to cut gas supplies to Belarus after accusing it of taking too much from transit pipelines. The problems, which are similar to those with Ukraine, follow friction over the expulsion of Russian political leaders last week.

Boston, 30 October 2002 (RFE/RL) -- After years of feuding with Ukraine over losses of gas from transit pipelines to Europe, Russia's Gazprom now seems to be having the same trouble with Belarus.

On 25 October, Gazprom Deputy Chairman Aleksander Ryazanov told reporters the Russian monopoly would stop supplying gas to Belarus because it has already used more than its allotment for the year. Although the two sides differ, Gazprom says Belarus received a "gas overdraft" of 1.5 billion cubic meters during the first nine months, the ITAR-TASS news agency reported.

But earlier in the week, Belarusian Energy Minister Uladzimir Semashko argued that Russia is obliged to supply more gas under an intergovernmental agreement, whether it comes from Gazprom or some other source, the Prime-TASS news agency said. In announcing the cutoff, Gazprom responded that even the higher amount in the agreement would be used up by mid-November at the current rate.

Gazprom's statement came two days after Russia protested the detention and deportation of Union of Rightist Forces leaders Boris Nemtsov and Irina Khakamada from the Minsk airport on charges of planning to aid the opposition to President Alyaksandr Lukashenka. It's not clear whether the gas stoppage is a sign of the Kremlin's displeasure or a separate business dispute.

The gas controversy has developed since June, when the privately owned Russian trader Itera cut supplies to Belarus by half after Minsk ran up a $24 million debt. The company was scheduled to provide nearly 40 percent of Belarus's gas this year. Itera restored service in July when the state-owned pipeline company Beltransgaz made partial payment, according to the RIA-Novosti news agency. But reports suggest that Itera may have stopped deliveries again.

Prime-TASS quoted Semashko as saying that supplies from Itera "have declined lately, which in effect means that the gap must be filled by other gas providers, in particular Gazprom." Belarusian Deputy Energy Minister Alyaksandr Sivak said Belarus had decided to increase its purchases from Gazprom next year because it charges $24 per thousand cubic meters, compared with the $36 charged by Itera.

But last week, Gazprom refused to meet the demand, complaining that Belarus had already used too much gas and that the lower price would not cover the costs. Instead, Ryazanov offered to help find fuel at the higher price from an alternate source.

Ryazanov said, "We do not plan to give Belarus additional volumes of gas because we do not have gas to spare and the price that they pay is too low," Interfax reported.

In fact, both the higher and lower prices represent huge Russian subsidies to Belarus. This week, Itera agreed to buy gas from Turkmenistan for $44 per thousand cubic meters. At that rate, the company would lose $8 on every thousand cubic meters it sells to Belarus. For Gazprom, the loss may be even greater, considering that the company sells gas to Europe for over $100 per thousand cubic meters, or nearly five times the concessionary rate for Minsk.

One reason for the price break is that Belarus provides Russia with transit routes for both gas and oil. Although about 80 percent of Russia's gas exports to Europe run through Ukraine, Belarus carries about 26 billion cubic meters of Russian transit gas.

Last January, Russian Prime Minister Mikhail Kasyanov agreed that Moscow would sell gas to Belarus at its own domestic prices, a move that cut the country's costs by a third.

Belarus owes Russia about $200 million for gas. That figure may even be higher because of slow payments under a barter deal that converted about $160 million of earlier debt to trade in goods and services. Ryazanov said last week that Belarus has been slow to deliver the goods and has paid for only about 8 percent of Gazprom's gas in cash.

Heavily industrialized Belarus has been one of the last CIS countries to take up energy-sector reforms, leaving the use of cheap fuel much the same as in Soviet times. After it won new concessions from Russia, Belarus lowered its domestic gas prices even further this year, encouraging more waste.

While it is hard to say how far Russia is willing to go with its energy subsidies, Gazprom may have reached its limit. It is unclear whether the company, which is 38 percent state-owned, was ever consulted when Kasyanov and President Vladimir Putin approved the lower rates.

But Belarus has served as an option for landlocked Russia in its long negotiations with Ukraine over gas transit to Europe, the second-largest source of Russia's hard-currency earnings after oil. After years of talks, Russia and Ukraine have agreed to join in an international consortium to manage the former Soviet pipelines, but they still disagree on whether Ukraine will retain majority control.

The negotiations began after Ukraine ran up a $1.4 billion debt for Russian gas, and Gazprom accused it of siphoning off extra supplies. Russia then threatened to build a bypass line through Belarus, cutting the flow through Ukraine. Although the plan is on hold, it remains as a threat in case the consortium deal with Ukraine falls apart.

Gazprom's new threat to Belarus suggests that siphoning may also have taken place there. Interfax quoted Ryazanov as saying that "Belarus exceeded its limit for pumping off Russian gas from the pipeline by 1.5 billion cubic meters in the first nine months of the year." If Belarus can run up big debts and then pump off extra gas, then Gazprom may face the same problems that it did in Ukraine.