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Russia, Belarus unhappy over gas deal

Deal has averted threatened gas shutdown that might have cut energy supplies to W Europe, reports Fred Weir.

india Updated: Jan 01, 2007 17:02 IST
Fred Weir

A last minute deal between Russia and Belarus has averted a threatened gas shutdown that might have cut winter energy supplies to Western Europe and created a diplomatic flap similar to last year's Ukrainian gas war.

But neither side appears happy with the bargain, which will double the price Belarus pays for its gas, sharply raise the transit fees Gazprom pays for exporting its product across Belarussian territory and allow Russia to purchase half of Belarus's pipeline network.

"Belarus has been granted the most advantageous terms of any country in the former Soviet Union," Gazprom chief Alexei Miller told a Moscow news conference.

Belarussian Prime Minister Sergei Sidorsky told journalists that the price hike, from $ 46 to $ 100 per thousand cubic metres of gas, could cripple his little country's economic development.        

"The conditions (of this deal) are very unfavourable for Belarus," he said. "We were compelled to sign this, in a difficult atmosphere on the eve of New Year, on very unfortunate terms."

Gazprom had been demanding $ 105 per thousand cum, which is still far below rates charged to other post-Soviet countries and the average $ 250 that European customers pay.

Russia had threatened to cut off gas to Belarus on New Year's Day, much as it did in a similar dispute with Ukraine a year ago.

Belarus warned it might retaliate by stopping Russian exports from passing through its pipelines, which could have led to a diplomatic crisis between Moscow and an increasingly worried Western Europe, which depends on Gazprom for 30 per cent of its natural gas.

For little Belarus, a pro-Moscow state that borders on Poland, cheap Russian gas had been seen as a reward for geopolitical loyalty.

Under the terms of the deal, Gazprom will compensate by paying 93 per cent more in transit fees for the use of Belarussian pipelines over the next five years. It will also fork over $ 2.5-billion in cash for a 50 per cent stake in Beltransgaz, the Belarussian pipeline network.