August 08, 2007

Belarus pays Gazprom's bill for Russian natural gas in full

14:02 | 08/ 08/ 2007

MOSCOW, August 8 (RIA Novosti) - Belarus has fully paid its $460 million debt for Russian natural gas supplies, ending a dispute between the country and Gazprom [RTS: GAZP], the state-controlled gas giant said Wednesday.

"Gazprom today received the last installment of debt payment for Russian gas supplied in the first half of the year," company spokesman Sergei Kupriyanov said.

Gazprom threatened last Wednesday to slash gas supplies to Belarus by 45% over the debt, accumulated since Russia more than doubled the price it charges its ex-Soviet neighbor for gas. Minsk caved in to pressure, paying an installment of $190 million towards the debt, prompting Gazprom to extend last Friday's deadline by one week.

Belarusian President Alexander Lukashenko, while reluctantly agreeing to empty government reserves to pay Gazprom, angrily accused Russia of attempting to take over Belarusian companies and "privatize the whole country."

Russia, which provides for a quarter of Europe's gas needs, pumps its gas to the continent through a vast network of pipelines passing through Ukraine, and to a lesser extent Belarus. The pricing dispute provoked fears of another supply interruption in the European Union, reminiscent of a gas spat between Gazprom and Kiev at the beginning of last year.

Moscow, which has traditionally backed Lukashenko despite his pariah status in the West, providing Belarus with heavily-subsidized fuel, signaled a departure from its policy last year. In December the countries signed a contract on natural gas supplies to Belarus and Europe-bound deliveries transited via Belarus in 2007-2011, under which Russia increased the gas price to Belarus from $46.68 per 1,000 cubic meters to $100 as of 2007.

While still less than half the average price Gazprom charges EU states for its gas, the price hike and promises of future increases dealt an unwelcome blow to the Belarusian economy.

Gazprom pays some $30 million a month for gas transit through Belarusian pipelines. In late December, the countries signed a protocol allowing Gazprom to acquire a 50% stake in Beltransgaz for $2.5 billion in installments over four years. Gazprom has so far paid $625 million for a 12.5% stake in the Belarusian pipeline operator.

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