Gazprom calls off gas cuts to Belarus

Russian energy giant Gazprom has called off planned gas cuts to Belarus, after the country paid off part of its half-billion dollar debt. The company has extended its deadline by one week for Belarus to pay in full.

Gazprom's statement came an hour later than expected but it seemed to be good news for Moscow and Minsk: Sergey Kupriyanov, Gazprom's official spokesmen said that there will be no cuts of the Russian gas supplies to Belarus. The Belarusian authorities are saying that Belarus has made the first payment of $US190 MLN to Gazprom and that the rest of the debt is expected to be paid in full by next Thursday.

“As you know, yesterday the Belarusian President made a speech. He admitted that the country had an outstanding gas debt and confirmed that Belarus has the money. He also gave instructions for the debt to be paid off. Yesterday evening the Beltransgaz delegation, led by the company's head Vladimir Mayorov arrived at Gazprom and we had the first results. Today Beltransgaz has made the first payment of a significant part of the debt. We see that Belarus is making real steps to settle the problem, so we have decided not to cut gas supplies to Belarus today. We are waiting for Belarus to fully pay off the debt until Thursday next week and fully meet the current payments for gas,” Sergey Kupriyanov said.

If the debt is not paid in full by next Thursday, then, according to Sergey Kupriyanov, August 10, 1000 AM local time is the next deadline and the option of supply cuts will be back on the table. But, as he told RT, he certainly hopes that things will not go that far and noted that common understanding has been found between the Gazprom officials and their Belarusian counterparts.

The next round of talks is to take place on August 10.

Talks have now finished for the day. They've been taking place against a background of increasing international calls for the issue to be resolved. The European Commission has already called on both Russia and Belarus to ensure that gas supplies to Europe are not interrupted. And the United States has also added its voice to those calling for agreement.

According to Belarusian President Aleksandr Lukashenko, Belarus was not making the payment as it was waiting for Russia to give them a credit to cover all these debts.  Indeed, Mr Lukashenko said that the credit that was offered by the Russian federation was a commercial rather than a state one and that was not acceptable for the Belarusian side.

On Thursday the Belarusian President promised a payment would be made.

“We will pay the money from our reserves. When we were signing the documents I honestly told Putin that we would not be able to pay more than half of the amount this year. I was told that Russia does not want to create problems for the friendly state of Belarus. Some people suggested going to the Kremlin and begging for a solution. I'm not going to be the one to do that. We had an agreement with Gazprom to delay payment till July, we received the credit but found ourselves in even more debts on top of the high gas prices they set. I gave an order to the government to take this money from our reserves and pay $US 460 MLN for Russian gas. It's not a huge sum for our country,” Aleksandr Lukashenko said.

His statement was seen on the whole as rather harsh and there were a lot of tough comments towards Russia. Among other things the Belarusian President said was that finally the country should get real in the relations with Russia, and this is actually what Russia has been asking for for a long time. 'Friendship is friendship, but business is business' is what Russia has repeated more than once concerning the relations with Belarus. Gazprom was asking Belarus to switch over to market relations, and Belarus is paying the lowest price for Russian gas.

At the beginning of 2007, Gazprom raised prices for Belarus from $US 46 to $US 100 per 1,000 QM.  In order to adapt to the new requirements, Belarus requested an extension to the end of the year without any penalty.

Gazprom responded by giving a credit of nearly $US 500 MLN. Belarus accepted it, but hasn't been able to pay the debt back on time.

The brief standoff has sent shock waves throughout Europe. During past cuts, parts of Europe experienced a drop in supplies which Gazprom said were due to the siphoning off of gas from transit pipelines in Ukraine and Belarus. But local staff at a compressor station in Poland, one country that could have been affected this time around, say gas levels received from Belarus remain stable.

The Kondratki gas compressor station is located in a small Polish town not far from the Belarus border.

Europol Gaz, the company responsible for transporting the gas through Polish territory, says Gazprom has so far honored its commitment by providing gas on time and for fixed quantities.

About 25% of Russian gas to Europe runs through Belarus.

The Russia-Belarus gas supply dispute has brought back unpleasant memories for Europe. But the situation, this time, is drastically different, as consumers in both Europe and Belarus will likely continue to have flames in the burners of their household stoves.

Also, speaking to RT, political analyst Kirill Koktysh explained why gas supplies to Europe are not under threat:

“The situation with gas supplies to Belarus is quite different from the situation with gas supplies to Ukraine and is also different from oil transportation through Belarus's territory. While almost all oil pipelines going through Belarus's territory are irreplaceable, gas pipelines are essential only for gas supplies to Russia's Kaliningrad region,” the expert said and then continued: “In fact, there are very few gas volumes going through Belarus to Europe and they can be easily replaced by the Ukrainian gas pipelines. Indeed, gas supplies to Europe cannot be affected even in case of gas blockade of Belarus.”   

Commenting on the issue, Vladimir Likhachyov, Deputy Director of the Energy Research Institute at the Russian Academy of Sciences, said he is sure that Belarus has the ability to pay. “They signed a protocol, the agreement last year. It is quite easy to consider the preferences for Belarus during four years, some special regime for payment. However, they signed the protocol and thus have to pay,” Vladimir Likhachyov noted.

“The crisis in a sense is over. It did not have to go this far. But really what is most important here – this is a bilateral problem. Gazprom's most important interest is the European customers. Nevertheless Russia wants to have good relations with all transit countries to make sure its consumers get what they pay for,” mentioned Russia Today's political commentator Peter Lavelle.

“As far as energy is concerned Russia has always paid for everybody in this part of the world. Countries go on their own way but to go on your own way you have to pay your own way and energy has always been part of that. The Soviet Union was built on free energy for everybody. Now Russia no longer wants to do that and most of the countries got over it,” added he.