Why Russia is cutting off gas supplies to Belarus

Discussion in 'Europe and Russia' started by nrj, Jun 23, 2010.

  1. nrj

    nrj Stars and Ambassadors Stars and Ambassadors

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    Russia is again using gas as a foreign policy tool to alter behavior of its neighbors. It wants Belarus President Alexander Lukashenko to join a new customs union championed by Russian Prime Minister Vladimir Putin.

    Russia began shutting off gas supplies to its neighbor Belarus on Monday, in an energy dispute with familiar political undertones.

    Experts say the dispute is unlikely to affect downstream customers in Europe – which depends on Russia for more than a quarter of its gas – as previous spats with Russia's neighbor Ukraine have frequently done. Belarussian pipelines carry just 20 percent of Russian exports to Europe and demand is much lower now due to warm summer temperatures.

    But the shutdown does reflect ongoing Russian willingness to use energy as a tool of foreign policy, experts say.

    Moscow has reportedly been losing patience with Belarussian President Alexander Lukashenko, who talks a strong pro-Russian game but actually pursues an independent course that increasingly conflicts with the Kremlin's wishes.

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    In recent months, Mr. Lukashenko has dug in his heels against joining a Belarus-Kazakhstan-Russia customs union being championed by Russian Prime Minister Vladimir Putin, has demanded duty-free Russian oil as the price of further cooperation, and has given refuge to ousted Kyrgyzstan leader Kurmanbek Bakiyev, some say against the Kremlin's wishes.

    "This gas cutoff is just another stage of the general crisis of relations between Russia and Belarus, and in particular Lukashenko's refusal to sign the customs union agreement with Putin," says Yaroslav Romanchuk, an analyst with Strategia, one of the few independent political think tanks in the Belarussian capital of Minsk. "There will soon be a presidential election campaign in Belarus, and it seems like Putin and [Russian President Dmitry] Medvedev have given up all hope of coming to terms with Lukashenko."

    On Monday, Mr. Medvedev ordered the Kremlin-run gas monopoly, Gazprom, to slash gas deliveries by 15 percent each day until the amount reaches 85 percent of Russian supplies to Belarus's state-run economy, or an amount equal to the $192-million debt claimed by Moscow.

    Lukashenko at first offered to cover the debt with farm products and machinery, a suggestion that was rejected out of hand by Medvedev. "Gazprom cannot take pies, butter, cheese, or pancakes or any other form of payment [except cash]. Our Belarusian partners must understand this," Medvedev said.

    By late Monday, Belarus' deputy prime minister Vladimir Semashko said the country would try to pay the debt within two weeks, even if it has to borrow the money. But Gazprom indicated that it would keep up the pressure, and re-route European gas supplies through Ukrainian pipelines for the duration of the dispute.

    Analysts say the Ukrainian example clearly illustrates how the Kremlin uses gas to coerce its neighbors. While pro-Western former Ukrainian President Viktor Yushchenko was in charge, Russia and Ukraine went through repeated annual "gas wars," and Russia jacked up Ukraine's energy prices to the same rates paid by Western European customers.

    But since a Moscow-friendly leader, Viktor Yanukovich, was elected in February, Russia has made a series of sweetheart deals with Kiev, including granting a 30 percent discount on gas prices in return for Russia's continued use of a naval base on the Crimean peninsula.

    "Russia found it easy to lower Ukraine's gas bill, once it saw political reasons to do so," says Alexei Makarkin, deputy director of the independent Center of Political Technologies in Moscow. "This dispute with Belarus is all about negotiations over the customs union project, and other political issues. Moscow has not been happy with Lukashenko's flirting with the West, or his refusal to grant diplomatic recognition to [the Russian-sponsored Georgian breakaway statelets of] South Ossetia and Abkhazia," he says.

    Lukashenko, a former collective farm director who has often been slammed as "Europe's last dictator," was freely elected in 1994 but has since held on to power by suppressing opposition and allegedly rigging elections. He recently told journalists that he will run for a fourth term of office, in polls to be held early next year.

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  3. SHASH2K2

    SHASH2K2 New Member

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    Right now USA is too much preoccupied with Afganistan issue and China. Its best time for Russians to try and acquire its lost influence in its vicinity and they are making best use of it.
     
  4. nrj

    nrj Stars and Ambassadors Stars and Ambassadors

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    First it was Ukraine now it is Belarus, Putin playing the right cards to bring the leadership in the regional countries with Pro-Russian attitude. Coming elections in Belarus will prove that. Russia is silently taking back the control on its interests in regional as well as global scale.

    Things will be noticeable when Russia turns focus to Europe. Defense ties with Turkey can be a good start. Russia has enough natural energy to negotiate any European deal. US can't do much about it, most probably they'll call EU to sell some another super-duper Missile shield.
     
  5. nrj

    nrj Stars and Ambassadors Stars and Ambassadors

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    Russia begins to restrict natural gas supplies to Belarus

    Russia began to cut off natural gas supplies to Belarus on Monday as talks over unpaid debts continued, Russian state media reported.

    President Dmitry Medvedev gave the order for Russian energy giant Gazprom to start restricting gas supplies, company CEO Alexei Miller said, according to official Russian news agency RIA-Novosti.

    Miller said the cut, which began Monday, will be "gradual, daily and proportional to the volume of debt."

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    Belarus has refused to pay Russian gas rates of $169 per 1,000 cubic meters for the first quarter of the year and $185 for the second quarter, RIA-Novosti reported. The former Soviet republic has instead been paying $150 since Jan. 1, ringing up a large debt in the process.

    Russia's action could hurt customers farther down the pipeline.

    Belarus has said it will be technologically unable to ensure complete natural gas transit to Europe, if Russia cuts gas supplies to Belarus by 85 percent, state media reported.

    In the past, other countries including Austria, Bulgaria, the Czech Republic, Germany, Romania, Greece and Turkey have complained that their gas supplies have been affected as Russia trimmed output to upstream customers like Belarus and Ukraine.

    Gazprom is the world's biggest producer and exporter of natural gas -- and Russia's most powerful company.

    It controls 20 percent of the world's natural gas reserves and operates the world's largest gas distribution network covering an area from Europe to the Far East, according to its website.

    Gazprom exports energy to 32 countries and provides around 25 percent of the European Union's gas supplies.

    Formed in 1989 to replace the Soviet Ministry of the Gas Industry, Gazprom is closely tied to the Russian government, which owns a controlling 50 percent stake in the company. Medvedev is a former Gazprom chairman.

    In recent years, an increasingly confident Moscow has used Gazprom to assert its authority over Russia's former sphere of influence by offering heavily subsidized gas to ex-Soviet countries.

    But that policy has led to disputes as Gazprom has then sought to raise prices.

    Gazprom has switched off gas supplies to another former republic -- Ukraine -- several times in recent years in a row over payments and Kiev's rejection of proposals to hike rates. Those disputes ended earlier this year when Russia agreed to a 30 percent drop in the price of natural gas sold to Ukraine, in exchange for permission to extend Russia's lease of a major naval base in the Black Sea port of Sevastopol, Ukraine, for 25 years.

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  6. nrj

    nrj Stars and Ambassadors Stars and Ambassadors

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    Belarus Decries ‘Gas War’ as Gazprom Lowers Supplies

    Belarus President Aleksandr Lukashenko ordered Russian gas transit to the European Union be halted, accusing OAO Gazprom of starting a “gas war” by cutting flows to his country by 30 percent amid a debt dispute.

    Lukashenko demanded Gazprom pay about $260 million in transit fees at a meeting with Russian Foreign Minister Sergei Lavrov today shown on Belarus state television, saying Russia was insulting his country with its demands for cash.

    Belarus told Gazprom that it’s taking gas meant for customers beyond its borders, said Sergei Kupriyanov, a spokesman for the Russian export monopoly. Gazprom will fulfill its contracts, he told reporters in Moscow.

    Russia, which supplies a quarter of Europe’s gas via Belarus and Ukraine, has raised concerns it uses energy as a political tool after it cut flows to Ukraine, whose then president sought to join the North Atlantic Treaty Organization, disrupting deliveries to Europe during freezing weather in 2006 and 2009. A threatened gas cut to Belarus in January 2007 was averted by a last-minute accord, more than doubling its price.

    “Russia’s new gas war is likely to tarnish its image as a reliable energy supplier,” Lilit Gevorgyan, a political analyst at IHS Global Insight, wrote in a research note today. “It also highlights the problems for Russia likely to occur in the future due to mixing energy business with foreign policy.”

    Widening Cut

    Gazprom widened the supply cut today from 15 percent yesterday, while seeking $192 million from Belarus for past deliveries, Chief Executive Officer Alexei Miller said on the Gazprom-controlled NTV television channel. As much as 85 percent of daily shipments may be cut, he said.

    Gazprom’s transit debt is “comparable” to what Belarus owes for supplies because the country refused to sign invoices this year, blocking payments, Kupriyanov said yesterday.

    The dispute may affect a maximum 6.25 percent of the European Union’s gas supply, European Commission spokeswoman Marlene Holzner said today in Brussels. The EU doesn’t expect a decline in its gas supplies, and Russia has assured the EU it will stick to its contracts, she said.

    “It is a non-issue given the time of year and the low supply environment,” said Adrian Callinan, director of European Gas Trading at London-based Noble Clean Fuels, part of Noble Group Ltd. “It is a localized problem to that region compared with a year ago when it affected the U.K.”

    Flows of Russian gas through the Yamal pipeline across Belarus remain unchanged, Polish Prime Minister Donald Tusk said today at a news conference in Warsaw.

    Strained Union

    Belarus was set to carry more than 20 percent of Gazprom’s Europe-bound exports of the fuel this year, according to the company. Gazprom may ship fuel via Ukraine, use gas in storage and access spot markets, Kupriyanov said.

    Relations between Russia and Belarus are souring as a customs union yoking the two countries and Kazakhstan falters. Belarusian Premier Sergei Sidorsky boycotted a meeting with his Russian and Kazakh counterparts, Vladimir Putin and Karim Masimov, last month. Putin has said the troika will miss a planned July 1 start date, citing Belarus’s push for subsidized energy as a stumbling block.

    “Lukashenko needs cheap energy to run the uncompetitive economy,” Gevorgyan said. “Lukashenko, however, has learned that maintaining his political independence and occasional loud spats with the Kremlin have so far helped him to get favorable deals for his country.”

    Miller said Belarus has taken no steps toward settling the debt, which arose as it continued to pay for gas at last year’s price. Belarus said it paid for May deliveries in full, Interfax reported today. Gazprom’s Kupriyanov wasn’t immediately able to provide the price of the latest payment.

    Ukraine has sufficient capacity to boost transit shipments, Deputy Prime Minister Mykola Azarov told reporters in Kiev today. Russia pledged Ukraine $40 billion in gas subsidies in exchange for an extended lease on a Black Sea naval base in April. Russian-Ukrainian relations have warmed this year since former President Viktor Yushchenko was voted out of office.

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  7. nrj

    nrj Stars and Ambassadors Stars and Ambassadors

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    Gas cuts doubled as row with Belarus rumbles on

    Gas supplies to Belarus have been cut further as President Dmitry Medvedev insists Gazprom will not accept “pies or pancakes” to pay off the debt.

    Earlier Minsk had suggested settling the $200 million account with machinery or technology – an echo of the early 90s when workers were sometimes paid in their factory’s products – but Moscow is only interested in cold, hard cash.

    On Tuesday morning Gazprom boss Alexei Miller was in an uncompromising mood, RIA Novosti reported.

    "Over the past twenty-four hours, Belarus has not taken any steps to repay the debts for the delivery of Russian natural gas and from 10 hours in the morning of June 22, a 30 per cent cut in planned gas supplies to Belarus was introduced," Miller said. On Monday supplies went down 15 per cent and Miller has said he’s willing to impose 85 per cent cuts if a deal is not reached.

    Gazprom spokesman Sergei Kupriyanov also complained about a lack of progress – and said Belarus was threatening to take gas from a transit pipe heading for Europe.

    “We have received a letter from Belarus First Deputy Prime Minister Semashko without any specific proposals on debt repayment. The letter contains a threat that Belarus will start taking gas from the transit pipe for the needs of the national economy, if there are further cuts in gas supplies,” he said.

    This could have a knock-on effect across Europe, but Gazprom deputy chairman Alexander Medvedev promised to do everything possible to prevent this.

    He proposed introducing a team of independent observers to monitor the flow of Russian gas, while prime minister Vladimir Putin suggested that gas could be routed via Ukraine until the row is resolved.

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  8. SHASH2K2

    SHASH2K2 New Member

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    In this USA China war biggest gainer will be Russia. only doubt I have is about Economical growth of Russia. They need good Economy to support their military upgrade and innovation.
     
  9. Armand2REP

    Armand2REP CHINI EXPERT Veteran Member

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    Why is Russia cutting off gas supplies... because Belarus hasn't paid the bill. thread closed...
     

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