Russia cuts gas to Belarus in payment dispute

21st June 2010, Comments 0 comments

Russia reduced natural gas supplies to Belarus on Monday after Minsk failed to settle a debt, brandishing again the country's energy clout and raising the spectre of supply disruptions to Europe.

Belarus took immediate steps in an attempt to defuse the crisis, saying it would settle the debt of nearly 200 million dollars (160 million euros) within two weeks.

"Belarus plans to settle its gas debt with Russia within the next two weeks," First Deputy Prime Minister Vladimir Semashko said in a statement.

But he added that Russia should also pay Belarus 217 million dollars in fees for transiting gas to Europe.

Analysts warned of "a new gas war" after supplies were cut and said the Kremlin move was aimed at punishing its wayward neighbour, whose maverick President Alexander Lukashenko has irritated Moscow by dropping his dependable loyalty in favour of a quest for closer ties with the European Union.

The flow of Russian gas to Europe via Belarus was not immediately interrupted after the reduction, Belarus's energy ministry said.

In a theatrical style typical of Russian gas supply cuts to its ex-Soviet neighbours, Russian President Dmitry Medvedev went on television and ordered Gazprom to close the tap on Russian gas supplies from O6OO GMT after Belarus failed to settle the debt.

Medvedev told Gazprom company chief Alexei Miller to reduce gas supplies to Belarus after Miller said Belarus, which is heavily dependent on Russian subsidies, had failed to come up with money and instead was offering equipment and machinery to cover the debt.

In a humiliating broadside at Lukashenko, Medvedev said he should come up with hard cash -- and not goods -- to pay the bill.

"Gazprom cannot accept anything towards the payment of the debt, neither pies nor butter not cheese nor pancakes nor other means of payment," Medvedev said.

Miller said the gas cuts would be increased to 85 percent in the coming days if a solution to the conflict is not found.

Gazprom spokesman Sergei Kupriyanov told AFP that talks were continuing but the next gas reduction may take place later Monday.

Kupriyanov confirmed that Gazprom owed money to Belarus for transit but said it was technically impossible to pay the debt since Belarus did not provide the necessary documents.

Gazprom has insisted the cut would not affect its European clients and analysts say the impact of any potential European gas disruptions would not be serious in the summer due to lower gas demand.

Kupriyanov said Russia was considering ramping up gas supplies to Europe via Ukraine, which itself has repeatedly come under pressure from Gazprom in the past.

A spokesman for Ukraine's state gas pipeline operator Ukrtransgas told AFP it had capacity to help with the transit.

Lukashenko, speaking to Nikolai Patrushev, the chief of Russia's Security Council, warned it was not in Russia's interests to upset a friendly state on its western borders, saying energy and security were closely linked.

"Issues of security of Belarus and Russia should not suffer due to unsolved problems in the economy and other spheres," he said in televised remarks.

The European Union closely watches gas disputes between Russia and its ex-Soviet neighbours after a row between Moscow and Kiev led to supplies of Russian gas to Europe via Ukraine being cut off for two weeks early last year.

Belarus transports about 20 percent of Russia's western-bound gas exports and Europe said it had activated crisis planning measures over the dispute.

Valery Nesterov, a gas analyst at Troika Dialog, said the dispute risked damaging the gas giant's already battered reputation.

"The use of gas as an instrument of political pressure is continuing," he said.

Renaissance Capital analyst Alexander Burgansky said that "a new gas war looms with Belarus" but said the dispute was likely to be over by autumn.

Gazprom said last week Belarus owed it 192 million dollars in unpaid debts and gas exports would be reduced if the debt was not settled.

The gas giant says Belarus may run up debt of up to 600 million dollars by year's end if it continues to pay at last year's prices like now.

Lukashenko says Belarus should pay less for oil and gas if the two countries are serious about ramping up economic cooperation.

© 2010 AFP

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