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Belarus Warns It May Block Gas

Gas transit through Belarus to Europe will be illegal unless Gazprom relents on demands that Minsk pay steep price increases in 2007, a senior Belarussian official said Wednesday.

Gazprom CEO Alexei Miller responded by demanding still higher prices and insisting that the gas for Europe cross the Belarussian border. Gazprom also said the threat was tantamount to planning to siphon off gas.

If Gazprom and Belarus do not agree on a price for Belarus, that would mean no contract for gas transit, Belarussian First Deputy Energy Minister Eduard Tovpenets said. "How can it transit without a contract? It would be a direct breach of the law," he said, Interfax reported.

He reiterated the stance that Belarussian Deputy Prime Minister Vladimir Semashko made at the Minsk airport late Tuesday after his return from failed talks in Moscow.

In response, Gazprom will ask the government on Wednesday to slap an export duty on the "market" price of $200 per 1,000 cubic meters of Belarus-bound gas, Miller told reporters. With the duty, the price would grow to $260, or an additional $1.3 billion per year, he told reporters late Wednesday.

Even if it cuts supplies to Belarus, which could happen at 10 a.m. on Jan. 1, Gazprom will continue pumping gas through Belarus to Europe, Miller said.

If Belarus siphons off as much gas as it currently consumes, Gazprom will not be able to make up for the loss, deputy CEO Alexander Medvedev said in a telephone call with investors.

About 30 billion cubic meters of gas -- or 20 percent of total exports to Europe -- go through Belarus. Belarus is consuming some 20 bcm this year.

Gazprom, which says it has offered big concessions on price to Belarus as negotiators raced to beat a Dec. 31 deadline, retorted that it could offer no more sweeteners. "Gazprom is not Santa Claus and cannot give such presents to authorities in Belarus," spokesman Sergei Kupriyanov said.

About 80 percent of Russian exports to Europe are pumped via Ukraine, with the rest going through Belarus. Russia supplies one-quarter of Europe's gas to more than 20 countries.

Belarus, whose President Alexander Lukashenko is accused in the West of crushing human rights, has long been a Russian ally.

Relations have soured due to what analysts say is President Vladimir Putin's distaste for Belarus' Soviet-style economic policy and reluctance to share enterprises with Moscow.

Gazprom will not supply gas to Belarus until a new contract is signed, but hopes it will not be forced to cut off supplies, Kupriyanov told Radio Mayak on Wednesday.

"I believe we will not have to resort to drastic measures and will reach an agreement," Kupriyanov said.

"Statements that Belarus will stick to the 2006 price of $46.68 per 1,000 cubic meters until the contract is signed can be described as plans to tap Europe-bound gas in the absence of a contract," he said.

Kupriyanov said Gazprom had made "unprecedented concessions" to Belarus.

Semashko proposed that Belarus buy 20 billion cubic meters of Russian gas at $75 per 1,000 cubic meters in 2007 and pay $1.5 billion for the supplies. Under the Belarussian proposal, Gazprom would pay $2.5 billion for a 50 percent stake in Beltransgaz plus transit charges, Kupriyanov said.

This means, he said, that Gazprom would not receive any money for its supplies to Belarus, but would have to give over $1 billion to Lukashenko "as a present."

Kommersant on Wednesday cited a Kremlin source as saying that Moscow had proposed that Lukashenko choose between the market price and Moscow's conditions of finalizing the union between the two countries.

A Gazprom source said some top employees had been told to cancel their New Year's holidays: "It looks exactly like one year ago with Ukraine," he said.

(The Moscow Times 28.xii.06)

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