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Last Updated: Sunday, 31 December 2006, 22:33 GMT
Russia-Belarus gas deal reached
Worker at gas pumping station in Belarus
Gazprom said Belarus was offered the "best conditions"
Russia and Belarus have reached a deal on gas supplies after Moscow threatened to cut supplies to its neighbour if a big price rise was not agreed.

This came after last-ditch talks in Moscow ahead of a deadline.

Describing it as "unfortunate terms", Belarus said it would pay $100 per 1,000 cubic metres of gas, below the $105 demanded by Russia.

Russia had threatened to halt supplies at 1000 (0700GMT) on Monday unless Belarus more than doubled its payments.

"The Belarussian side, in a difficult atmosphere on the eve of the new year, signed an agreement on unfortunate terms," Belarussian Deputy Prime Minister Vladimir Semashko said.

Gazprom CEO Alexei Miller said the deal was done at 2358 (2058GMT), adding that Belarus had been offered "the best conditions".

Both nations have accused each other of blackmail over the dispute.

About 20% of Russian gas exports to Europe pass through Belarus, the remainder through Ukraine. Belarus had threatened to disrupt Russian gas supplies to Western Europe.

It echoes a fierce row last year between Russia and Ukraine, and comes as Russia is pushing up prices for many of its customers.

Energy diplomacy

Russia has been accused of using its energy muscle to re-impose its will on what is sometimes called Russia's "near abroad" - the countries that were once part of the Soviet Union.

Russian President Vladimir Putin (left) and Belarussian president Alexander Lukashenko
Relations between the two countries have become fractious

Although some of the targeted countries, such as Ukraine and Georgia, have strained relations with the Kremlin, Belarus has historically remained an ally throughout the post-Soviet period.

Gazprom insists the planned rise from $47 to $105 merely reflected market prices.

However, as has been the case with Belarus, the price rises are often coupled to demands for shared ownership of those countries' gas or oil distribution networks.

A half-share in Belarus' gas monopoly Beltransgaz, which operates its own pipelines and Gazprom's export pipeline, is up for grabs - but only, says the government in Minsk, if the price of gas stays lower.

European Union countries in particular were keen to avoid a repeat of the gas shortages which accompanied the Russia-Ukraine dispute.

At that time, Gazprom accused Ukraine of siphoning off gas meant for Europe, and has also warned Belarus against doing the same thing.

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