August 1, 2007 / 8:50 AM / 11 years ago

UPDATE 4-Gazprom to halve gas to Belarus in debt row

(Adds Gazprom plan, Germany’s VNG in para 3, 5-6, 13)

By Dmitry Zhdannikov

MOSCOW, Aug 1 (Reuters) - Russia will halve gas supplies to Belarus from Friday to pressure Minsk over unpaid debt, its gas monopoly said, causing concern in Europe that the row may once again lead to energy supply cuts across the continent.

Gazprom (GAZP.MM), the world’s top gas producer that supplies a quarter of Europe’s gas, assured European customers on Wednesday that it would continue to pump gas exports to them across Belarus.

But it also notified customers in over 20 European countries that it was prepared to use alternative routes and take legal action if Belarus siphoned off gas for its own use from transit pipelines.

Both Gazprom and analysts said any potential supply disruptions to Europe would be limited, as gas demand is relatively low in the summer.

“Should Belarus start illegal offtake of gas, we have a concrete plan so customers get their amount of gas,” Gazprom spokesman Ilya Kochevrin told a conference call.

“If they do that we will go to court and will also increase supplies via alternative (routes). But frankly we don’t expect them to do it because it is summer time,” he said.

The statement echoed previous disputes between Russia and its neighbours — Belarus and Ukraine — that led to gas and oil supply cuts to Europe in the past three winters, underlying Europe’s heavy dependance on Russian energy resources.

During previous rows, Gazprom repeatedly accused Belarus and Ukraine of siphoning off gas from transit pipelines on their soil. Both denied stealing gas but also argued they could not cut supplies to the population during the cold winter months.

Belarus is a transit route for 20 percent of Gazprom’s exports, mainly to Poland and Germany, while the rest reaches Europe via Ukraine.

SUMMER HELPS

Belarus’ energy ministry confirmed it had received the warning but declined to say whether a quick deal could be reached to resolve the dispute over a $456 million energy debt.

Alexander Burgansky, analyst at Renaissance Capital, said he believed Belarus was unlikely to start taking gas from transit pipelines: “Consumption is seasonally low, and underground storage facilities are full everywhere.”

“Supply disruption in the summer is not generally a problem,” agreed Niall Trimble from Energy Contract Company.

German gas importer VNG said it was also “relaxed for now”: “We use different transport paths and different suppliers and our underground storage facilities are quite full,” said a spokesman for the Leipzig-based company.

But the European Commission said it was taking the matter “very seriously” and called on both parties to resolve the row.

Polish Economy Minister Piotr Wozniak said he had not yet seen any drops in pressure: “So far gas is flowing normally.”

Belarus has asked Russia for more time to pay the bill and is seeking to borrow money from Moscow, even though economists and officials reckon Minsk has enough cash on hand to cover the cost of dearer energy imports.

Gazprom (GAZP.MM) more than doubled prices at the start of the year after a long pricing dispute with Minsk.

That row was eventually resolved on terms that Belarus’ long-serving president and — until recently — pro-Moscow loyalist, Alexander Lukashenko, has since fiercely criticised.

Belarus now must pay $100 per 1,000 cubic metres of Russian gas — up from the old price of $46 that was heavily subsidised by Moscow — but was given a six month grace period. Gazprom charges customers in Europe over $250 per 1,000 cubic metres.

Belarus wants to import 21.5 billion cubic metres of gas from Russia this year, including 10 bcm in the first half.

To read an analysis on the Belarus gas row [ID:nL01775070]

To see a factbox click on [ID:nL01299567]

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