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Belarus: Minsk May Lose Gas Company To Settle Dispute With Russia

Belarus has averted a shutoff of Russian gas with a promise to pay its bills and permit the sale of shares in its national gas company. The move marks a setback for President Alyaksandr Lukashenka and his attempts to protect an unreformed economic system based on supplies of subsidized Russian fuel.

Boston, 13 November 2002 (RFE/RL) -- Russia and Belarus have settled a feud over gas supplies with a loan, an apology, and a plan for a possible takeover of the Belarusian gas network, extending the reach of the powerful Russian monopoly Gazprom.

On 11 November in Moscow, Russian Prime Minister Mikhail Kasyanov met with his Belarusian counterpart Henadz Navitski and announced an end to the two-week-old dispute over Gazprom's decision to cut gas deliveries to Belarus by half.

Kasyanov told the official RIA-Novosti news agency, "The matter has been exhausted." The talks averted a complete stoppage of gas to Belarus, which had been threatened for 15 November.

On returning to Minsk, Navitski told Belarusian television, "We agreed that Belarus will have steady supplies of gas until the end of this year." Belarus pledged to make timely payments and to collect gas bills from consumers. It also presented a request for more gas next year, although Gazprom said it will only forward the demand to other companies that will charge far higher rates.

For now, the settlement may promise a pause in the stormy relations with Belarus and heat for its citizens this winter. But the future for Belarus could be severe. The country has been a bastion of Soviet-style politics and economics, a feat that may prove harder without Soviet-era prices for fuel. The threat of change drew angry outbursts from Belarusian President Alyaksandr Lukashenka last week.

Lukashenka accused Moscow of "unprecedented pressure" and "attempts to shake us down" after Gazprom refused to provide more gas at heavily subsidized domestic Russian prices. Lukashenka said Russia's goal was to gain control of the state-owned Beltranshaz pipeline company. The Russian Foreign Ministry called the issue a "purely economic" affair.

Gazprom blamed Belarus for taking 15 billion cubic meters more than it was allowed from transit pipelines in the third quarter of this year. It also said Belarus owed $251 million for gas used since 1999. But Monday's announcement seemed to downplay the demand for such a large sum.

Instead of $251 million, Kasyanov said Navitski had "admitted a debt of more than $80 million," RIA-Novosti reported. Kasyanov said Belarus plans to pay off the amount with help from a $40 million interstate credit, which Russia had granted earlier. In other words, it appears that the Russian government will cover the payments to Gazprom for now. The government owns 38 percent of Gazprom.

At least on Monday, the debt seemed to disappear as quickly as Lukashenka's charges. Russia's ITAR-TASS news agency quoted an unidentified official who participated in Monday's talks as saying that Navitski had "apologized to the Russian side on behalf of the Belarusian leadership for the tension and extreme emotions" of Lukashenka's tirade.

The RosBalt news agency reported Kasyanov as saying: "The tensions around the supplies of Russia's gas to Belarus had been due entirely to the government of Belarus having been misinformed and, therefore, believing that the country's companies owed nothing for gas. Russia has presented to the government of Belarus documents proving otherwise."

The account is implausible, since Lukashenka cited the debt just last week. Navitski and Belarusian energy officials have also made repeated statements about it for the past two years. Gazprom previously cut supplies by 30 percent in April 2000 for nonpayment. The Russian gas trader Itera reduced shipments by 50 percent last June until partial payment was made. Officials have been fully aware of the debt.

As part of Monday's agreement, Navitski also pledged that Belarus would submit bills to its parliament this week to turn Beltranshaz into a joint-stock company. The measures would give Gazprom a long-awaited chance to gain control over the gas network, perhaps confirming some of Lukashenka's suspicions.

On Tuesday, Gazprom's deputy chief executive, Aleksandr Ryazanov, was far from apologetic, telling the Russian State Duma that Belarus owes $165 million plus fines and penalties, Interfax reported. Gazprom plans to convert the balance of debt into Beltranshaz shares, he said, giving it "at least ownership of those shares."

Ryazanov also blamed Belarus for blocking privatization, liberalization of the gas market, and direct dealings with Belarusian customers. He estimated that Gazprom subsidies to Belarus had been worth $2 billion, costing the company $800 million over the past four years.

Moscow has supplied Minsk with cheap gas until now, in part, for economic reasons. Belarus reciprocates by charging lower transit tariffs than Ukraine for gas exports to Europe, presenting a possible alternate route whenever Kyiv turns uncooperative. The union treaty with Belarus has given Russia another reason for concessions. Russia slashed its already-low prices for gas sold to Belarus last May. The higher rates charged by Itera are still only a third of European gas prices, even though they may be hard for Belarus to pay.

But the motivation for price breaks has faded after Ukraine's recent agreement to form a consortium with Russia for managing its pipelines. Russia is also pursuing a third gas route to Europe, known as the North European Gas Pipeline project. The line would run through Finland and across the Baltic Sea. Control over either route would reduce Russia's need to keep subsidizing Belarus, while control over the Belarusian pipelines would give it more clout with Ukraine.

On Tuesday, Ryazanov confirmed that Gazprom's new policy toward Belarus is linked to the alternate routes. He said that if Belarus continues to block change, "we will have to direct our pipeline through the Baltic seabed."

Gazprom may now be closing in on its goal of securing its access routes to Europe for the first time since the Soviet breakup, while Belarus could face tougher times without cheap Russian fuel.