Gas War Looms As Belarus, Russia Talks Falter

MOSCOW, Russia -- Belarus and Russia are set to renew last-ditch talks on resolving a gas price dispute that risks disrupting energy supplies to the European Union from New Year's day.

Intense negotiations in Moscow ended Friday without result, amid mutual accusations of blackmail.

Russia's gas monopoly Gazprom says it will cut off Belarus' natural gas supply at 0700 GMT Monday if the ex-Soviet republic refuses to accept a steep price increase, prompting fears that 2007 will start in freezing conditions for many of Belarus' 10 million people.

The government in Minsk warns that in retaliation it could refuse transit of Russian gas across its territory to western Europe, potentially causing shortfalls in EU members such as Germany, Lithuania and Poland.

Gazprom spokesman Sergei Kupriyanov said meetings with Belarussian energy officials were to restart Saturday. "Of course we'd like to reach a deal," he told AFP.

But the talks ended in bad spirit late Friday after Belarus' authoritarian President Alexander Lukashenko accused Gazprom of blackmail.

"If this blackmail continues, we will take shelter in bunkers, but we will not give in," he said, barely 60 hours ahead of the Monday deadline.

Gazprom wants to end Soviet-era subsidies to Belarus, as well as to a string of other ex-Soviet republics, and argues that more than doubling the current price for gas paid by Belarus would simply bring fees in line with market export rates.

Lukashenko repeated the argument that Belarus, which is joined to Russia in a loose economic union, should pay no more than a normal Russian region.

"We want the prices to be the same for us and for them. Whether it is 200, 300 or 500 dollars per 1,000 cubic metres, the conditions should be the same," he said, arguing that a gas price rise would make Belarussian exports to Russia uneconomic.

Currently, Belarus pays 46.68 dollars per 1,000 cubic meters of gas.

Gazprom originally demanded an increase to 200 dollars, which is closer to western European prices, unless Belarus agreed to sell 50 percent of its domestic pipeline operator Beltransgaz.

Gazprom is now offering a contract charging 105 dollars per 1,000 cubic meters -- 75 dollars per 1,000 cubic meters in cash payments, plus the equivalent of another 30 dollars in shares of Beltransgaz. Under the deal, Gazprom would become joint owner of Beltransgaz.

Belarus says it will hit back by blocking transit of Russian gas to Europe, arguing that without a contract for its own supplies, there can be no contract on transit. About five percent of gas consumed in the EU is imported via Belarus.

Gazprom vice-president Alexander Medvedev was quoted Friday in the French newspaper Le Figaro accusing Minsk of "grotesque blackmail."

The conflict echoes last years's winter price war between Russia and Ukraine over the supply and cost of gas which led to shortages in western Europe.

However, only 20 percent of Russia's gas exports transit via Belarus, compared to 80 percent through Ukraine. Demand was also higher 12 months ago when Europe was in the grip of one of the coldest winters on record, compared to the unusually mild season so far this year.

Western governments gave strong diplomatic backing to Ukraine's pro-Western president, Viktor Yushchenko, but Lukashenko is a political pariah in Europe and the United States.

The EU has limited itself to calling on the two parties to reach a deal that does not threaten European supplies, while the authorities in France and Germany say they are not worried by the prospect of shortages.

Ukraine announced on Thursday its readiness to increase the transit of Russian gas through its territory in case of possible disruptions on the Belarus route.

Source: AFP


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