Belarus presses Moscow for gas discount

By Jessica Bachman

MOSCOW (BestGrowthStock) – Russian Prime Minister Vladimir Putin spoke with his Belarus counterpart Sergei Sidorsky by phone on Friday about a contentious gas contract, in which Minsk is demanding a 2011 discount from Moscow.

While Belarus, which transports one-fifth of Russia’s gas to Europe, has received concessions in the past, Moscow says none are likely this year, raising concerns that supplies to other countries could be disrupted in case of a new year standoff.

Each year the countries make amendments to their five-year gas contract that expires at the end of 2011, and this year, Belarus’ argument for why it should pay a lower price for gas is grounded in the creation of a free-trade zone with Russia.

“Now that the countries have established a united economic space, Belarus feels entitled to paying the same rates as within Russia,” said Mikhail Korchemkin, head of East European Gas Analysis.

“But this is a weak argument because within Russia, which is certainly a united economic space, because the domestic gas prices vary widely from region to region,” he said.

Korchemkin also said that even if the price rises to around $215 per 1,000 cubic meters of gas from the current $190 by the end of 2011 — linked to an oil price of around $85 — the country will still be paying the lowest rate of all customers of Gazprom, state-owned gas export monopoly.

The gas dispute comes as Moscow and Minsk, where Alexander Lukashenko was reelected president this month, have agreed on oil export duties, another contentious issue that had made investors nervous at the height of the cold season in Europe.

Gazprom will not cut gas prices for Belarus in 2011, but will reduce them in 2012 under a new contract, its deputy CEO was quoted as saying on Friday.

The current contract, signed in 2006 states that in 2011 Belarus will pay European rates for gas, but Minsk hopes that the creation of a free-trade zone between the two countries will help get it discounts.

“They are difficult discussions, but there remains optimism that we will come to an agreement,” a Belarussian energy official told Reuters under the condition of anonymity as he is not authorized to speak to the press.

“The political background is reasonably favorable now … Although a certain gap exists between the price proposed by the Belarussian and Russian sides, but it is not that big and it would hardly make a big difference for Russia,” he said.

In recent years, rows over Russian gas pricing and transit tariffs with both Belarus and Ukraine, whose pipelines take Moscow’s energy exports to Europe, have led to the disruption of vital supplies to European Union countries.

This summer, a dispute over gas payment and pricing triggered a four-day standoff between Belarus and Russia and resulted in Russia cutting gas supplies to Belarus. But Gazprom says there is no threat of supply disruptions this winter.

“We have a contract, and the gas price is set according to contract, so gas supplies and transit is assured,” Gazprom’s spokesman Sergei Kupriyanov told Reuters on Friday.

(Reporting by Jessica Bachman and Daria Korsunskaya in Moscow, and Andrei Makhovsky in Minsk; Writing by Jessica Bachman; Editing by Derek Caney)

Belarus presses Moscow for gas discount