India Intelligence Report

 

 

   Belarus-Russia Gas Conflict

  Allies Russia and Belarus seem to be heading for a stalemate over the price of gas that can plunge Europe into gas shortages if supplies are halted by Russian company Gazprom and affect its living and businesses.
 

 

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Allies Russia and Belarus seem to be heading for a stalemate over the price of gas that can plunge Europe into gas shortages if supplies are halted by Russian company Gazprom and affect its living and businesses. Over the weekend, there was confusion over whether Gazprom and Belarus had achieved consensus but the difference continues with Minsk’s offer was USD 5 less than the USD 105 per 1000 cubic meters gas.

This standoff is also expected to affect the Belarus economy centrally administered by Soviet-admirer President Alexander Lukashenko as its industries depend on cheap Russian gas to remain competitive. Accusing Gazprom of blackmail, Belarus hinted that it may withhold transit rights for Gazprom rights as Ukraine did last year causing much hardship for Europe if it stopped gas supplies to its companies.

If the price of gas were to go up, Lukashenko authoritarian control over the 10 million-nation which enjoys century old relationship with Moscow can be significantly weakened. But Russian Kremlin seems to be nonplused as it grown weary of providing political and unsustainable economic support for Lukashenko to gain his support. They argue that the price rise is only reflective of market rates and that Gazprom has not raised prices to former Soviet nations.

The new demand is for a price of USD 105, it expects USD 70 in cash and the balance in shares of its gas pipeline partner Beltransgaz and the price would increase annually and by 2011 would reach a European market-style pricing. Even with this pricing, the 2011 projected rate is USD 144 which is far shorter than USD 200 Gazprom initially wanted.

Russia supplies 2/5th of EU’s gas needs through transit pipes in Ukraine but gets only a small portion through Belarus—most of the gas flows through Ukraine.