Belarus gas row 'may hurt Europe'

Relations between the two countries have become fractious

Russian energy giant Gazprom has warned that its gas price dispute with Belarus may affect consumers across Europe.

Gazprom has threatened to cut off gas supplies to Belarus unless it accepts an increase in prices from 1 January.

Belarus responded that if supplies were cut, it would deny Gazprom access to its pipelines, in a move that could hurt supplies elsewhere in Europe.

A clash between Ukraine and Russia over pricing last winter was blamed for a surge in UK consumer gas bills.

Reports from Belarus's capital, Minsk, said residents there had stocked up on warm clothing in anticipation of a shutdown next week.

"If a gas supply contract for next year is not reached, Gazprom will have no grounds for deliveries of gas to Belarus as of 10 am Moscow time (0700 GMT) on 1 January, 2007," Gazprom chief executive Alexei Miller said.

Still running

Earlier on Wednesday, Belarus had said that it did not expect Gazprom to cut off its gas on New Year's Day despite the problems.

"There will be gas on 1 January," said Belarus' Deputy Prime Minister Vladimir Semashko after returning from failed talks on the issue in Moscow.

Mr Semashko told journalists that a "preliminary agreement" had been reached on raising the price to $75, but Gazprom had unexpectedly repeated previous demands that prices should go up to $110.

RUSSIAN GAS COSTS FOR 2007 Ukraine: $130 for 1,000 cubic metres (was $95) Georgia: $235 ($110) Moldova: $170 ($160) Belarus: Gazprom wants $110 ($47) Azerbaijan: Gazprom wants $235 ($110)

Mr Semashko described this as a provocation, according to the Russian news agency Itar-Tass.

Gazprom also wants Belarus to hand over a 50% share of the country's distribution network, including a valuable transit pipeline which supplies gas to Poland and Germany.

Mr Semashko suggested that Belarus would not allow Gazprom's supplies to pass through its territory if the company cut off Belarusian gas supplies.

"We are mutually dependent," he said. "If I don't have a domestic gas supply contract, Gazprom won't have a transit deal."

Gazprom had written to partners in Lithuania, Poland and Germany "about the gas supply situation occurring with Belarus", said chief executive Alexei Miller.

New deals

Russia says its neighbours have been paying below-market rates and these now need to be brought into line with European prices.

Belarus currently pays $47 per 1,000 cubic metres for the gas it imports from Gazprom, Russia's state-owned gas monopoly.

Last week, Georgia agreed to pay $235 for 1,000 cubic metres of gas, more than twice the previous price of $110.

Moscow has also renegotiated its gas contract with Bulgaria, which will see the latter pay up to 45% more for its gas imports over the next five years.

Critics argue Moscow is using strong-arm tactics to consolidate its economic supremacy in the region, at a time when high demand for energy and fears of supply shortages have strengthened its position as Europe's leading gas supplier.

The dispute has strained relations between Russia and Belarus, which are traditional allies.

Last week, Russian president Vladimir Putin and his Belarusian counterpart, Alexander Lukashenko, met in an effort to resolve the issue, but made little progress.

Analysts said a hefty price rise over the winter could further undermine Belarus' struggling, largely state-controlled, economy.