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Russia and Belarus sign new gas contracts

25 November 2011 17:05 (UTC +04:00)

Russia is the main ally and sponsor of Belarus’ authoritarian President Alexander Lukashenko, but Lukashenko had been reluctant to yield control over the pipeline network and other Belarusian economic assets in the past, accusing Russia of trying to erode his nation’s sovereignty.
Lukashenko’s hand, however, has been softened recently by a severe economic crisis that has weakened his power and made him more prone to compromise.
Russia’s Gazprom already owned 50 percent in Belarus’ pipeline operator, Beltransgaz, and had been eager to gain full control. It said in a statement after the signing that it had agreed to pay $2.5 billion for the remaining 50 percent stake.
Russia provides about a quarter of the natural gas that Europe consumes with 80 percent of it going through Ukraine. The rest is shipped through Belarus and Turkey.
Moscow has sought to win control of existing transit routes and build new export pipelines bypassing its neighbors in order to secure its hold on energy supplies to Europe, its main export market.
Past pricing disputes between Ukraine and Belarus have led to disruptions in energy supplies to customers in the European Union, prompting EU nations to intensify a search for alternate supply routes.
Russia’s Energy Minister Sergei Shmatko said after the signing Friday that the deal has brought an end to the energy wars between Russia and Belarus.
As part of the deal, Russia has also reduced the price of gas it sells Belarus. Prime Minister Vladimir Putin said Friday that Gazprom will now charge Belarus $164 per 1,000 cubic meters of gas in the first quarter of next year, down from the $280 per 1,000 cubic meters it was paying in the third quarter of this year. The gas price for Gazprom customers in Europe hovers around $400 per 1,000 cubic meters.
The low gas price is essential for the Belarusian economy, most of which has remained in state hands. Belarus has been hit by its worst financial crisis since the 1991 fall of the Soviet Union, which has led to sharp devaluation of the national currency and triggered a high inflation that has eroded public savings.