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New Year's gas crisis looms for Russia's neighbors
By Stephen Boykewich
AFP
MOSCOW
Petroleumworld.com 12 14 06As a January 1 deadline looms for Belarus and Georgia to either strike new deals for Russian gas or face possible supply cuts, Minsk is showing defiance and Tbilisi is lining up alternatives, but Moscow seems to hold all the cards, analysts said.
Generous Russian gas subsidies to its former Soviet neighbors have fallen like dominoes in recent years as state gas giant Gazprom has sought to hike prices nearly to European levels -- currently averaging 235 dollars (177 euros) per thousand cubic meters (tcm).
It has been a bitter pill to swallow in countries like Ukraine, which was paying about 50 dollars per tcm just a year ago, and had its gas supplies cut when it resisted Gazprom's demand for a more than fourfold increase.
Now Georgia and Belarus are facing similar demands, and though each is resisting in its own way, both are running up against the hard reality of Russia's new energy policy: Moscow sets the terms, and its partners "take it or leave it," Alfa Bank analyst Chris Weafer said.
"No matter how you look at it, the cards are all stacked heavily in Russia's favor and against Belarus and Georgia," Weafer told AFP.
After witnessing the January cutoff to Ukraine and Russia's hardball tactics to gain state control of the foreign-run Sakhalin-2 energy project -- using environmental pressure to threaten a project shutdown -- "both countries know the game very well," Weafer said.
"They will be under no illusions that Russia will cut gas supplies to get what it wants."
What Russia wants in the case of Belarus is what it wanted in countries such as Ukraine and Armenia -- control over valuable gas transport infrastructure, analysts said.
Armenian gas prices are set at 110 dollars per tcm to the end of 2008, Gazprom spokesman Sergei Kupriyanov told Echo of Moscow radio in a recent interview, in exchange for ceding control of its gas distribution network.
"It's a package deal in which we strengthen our position in Armenia, we get assets that interest us," Kupriyanov said.
Minsk is trying hard not to give up control over its own pipeline network, including transport pipelines to western Europe that are "its last trump card in bargaining with Russia," Belarussian analyst Tatyana Manenok told AFP.
Belarussian President Alexander Lukashenko has threatened to break relations with Moscow if Gazprom does not back down from its current demand of either 200 dollars per tcm of gas or 50 percent control over Belarussian pipeline company Beltransgas.But Moscow has already dealt Minsk a blow with yesterday's decision to introduce steep tarrifs on its oil exports to its traditional ally.
Factor in Minsk's reliance on cheap gas to prop up its manufacturing sector, and "the Belarussian economy, which is Soviet and unreformed, is set for collapse," Manenok said.
Georgia has more leeway and is moving fast to secure enough gas from neighboring Azerbaijan, as well as Iran -- which has left Washington less than happy -- in an effort to become completely independent from Russia.
Georgian energy officials will hold talks with Azerbaijani, Turkish and Iranian officials over the next several days to see if Georgia can cover its 2007 needs for at least 1.7 billion cubic meters of gas even if Gazprom turns off the taps, an energy ministry spokesman told AFP.
The catch, Alfa Bank's Weafer said, is that Georgia's alternative gas sources are likely to cost close to the 230 dollars per tcm Russia is demanding.
However painful Russia's neighbors are finding Gazprom's new pricing policy, "they've enjoyed a subsidy that was appropriate for the Soviet Union and was extended for 15 years."
Now, "they're between a rock and a hard place," Weafer said.
AFP 13 1357 GMT 12 06
Copyright© 2001 AFP All Rights Reserved.
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