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Russia: Moscow May Soon Acquire Belarusian Gas Network

Belarus appears ready to sell shares in its gas network to Russia ahead of schedule following a government statement that state-owned Beltranshaz will become an open joint-stock company before April. Moscow's demand for privatization was a key condition for continuing gas sales in November and a top prize in the strategy to secure export routes to Europe through Belarus and Ukraine.

Boston, 11 February 2003 (RFE/RL) -- After months of friction, Belarus is moving to let Russia take over its gas network even sooner than Moscow originally demanded. Last week, unidentified Belarusian officials told the Interfax news agency that the government will turn the state gas firm Beltranshaz into an open joint-stock company before 1 April. The privatization next month could effectively allow neighboring Russia's gas monopoly Gazprom to gain control even earlier than the 1 July target date agreed to in December.

The speedup seems to be part of a remarkable recovery in relations, which fell apart in a fury last August after President Alyaksandr Lukashenka blasted President Vladimir Putin's proposal to unify the countries' currencies at the start of next year. The union treaty calls for the monetary merger to take place in January 2004, which has now been reaffirmed as the date for adopting the Russian ruble in Belarus.

Lukashenka never fully explained the reasons for his outburst, although he apparently hopes to have influence over the "emissive center," or, in other words, the central bank that will print the currency. In order to secure a reasonable deal on converting its currency into Russian rubles, Belarus needs more time to bring its annual inflation rate of 34.8 percent into line with Russia's rate of 15.1 percent last year. In dollar terms, the Belarusian ruble is worth about one-sixtieth of its Russian counterpart.

The fight over currency coincided with a conflict over Russia's heavily subsidized gas exports to Belarus, which Gazprom cut by half in October and threatened to stop altogether due to nonpayment of debt. Both problems were resolved during fence-mending meetings in Moscow in November, resulting in very little payment by Belarus but a promise to privatize Beltranshaz by July in response to Russia's demands. The decision was confirmed during Putin's visit to Minsk last month.

The network will be a prize for Gazprom as it seeks to extend its reach beyond Russia and to restore its control over all former Soviet export routes to Europe. A parallel process is occurring in Ukraine, where President Leonid Kuchma has agreed, after much resistance, to set up an international consortium with Russia as an equal partner to manage its transit lines. As with the Belarusian currency issue, the terms of who will control the consortium have been kept ambiguous.

But Lukashenka's decision to convert Beltranshaz into a joint-stock company ahead of schedule may not be unrelated to Gazprom's breakthrough with Kuchma in Ukraine. Interfax quotes a government resolution as saying that the decision to privatize the company "was made in the interests of attracting investments for developing the country's gas-transport system." The consortium in Ukraine is also seeking investment capital to renew the country's aging transit lines.

What began as reluctance may have turned into a race to see which country will allow Gazprom in first. While Ukraine has carried up to 90 percent of Russia's gas traffic to Europe, Belarus could gain a greater share, along with an assurance of subsidized gas for years to come.

Last week, Interfax reported that Russia's new Yamal Peninsula pipeline will open in Belarus in mid-2003, allowing shipments through Poland to Germany. Like Ukraine, Belarus may well seek a face-saving formula to avoid the impression of a Russian takeover of its gas system. Lukashenka has shown little liking for privatizing large state enterprises before.

Last week, Belarus officials denied that the government would trade interest in Beltranshaz for what it claimed was $130 million in gas debts. But the effect may be much the same if Gazprom acquires the firm and eventually pays itself. The government has estimated the company's basic assets at 600 billion Belarusian rubles ($306.6 million), plus 85 billion rubles for distribution and storage facilities.

Beginning this month, Gazprom has demanded that all gas payments from Belarus be made in cash, while the independent gas trader Itera has required 30 percent advance payment for deliveries, RBC News reported. Belarus was said to owe $226 million at the start of the year for imported fuel.

Both Belarus and Ukraine have become more open to Russia's suggestions on gas transit and share ownership since Gazprom pressed plans to build a North European pipeline project across the Baltic Sea. The $5.3 billion underwater line would link Russia directly with Germany, the Netherlands, and eventually Great Britain.

While such a project seemed unlikely when it was first proposed more than a year ago, Russia's experience with the recently opened Blue Stream gas line across the Black Sea to Turkey may make the plan seem more feasible now.