RUSSIA - Belarus.

Gazprom Deputy Chairman Alexander Ryazanov on April 4 said Gazprom will at least triple the price of gas to Belarus by 2007, raising the stakes in the giant's long struggle for control of Belarus' pipeline infrastructure. Speaking at a conference titled "The Gas Factor in the Russian Economy", Ryazanov said: "The current price is $46.68/'000 CM. Belarus is the only country which still has not switched to market prices for gas. We believe that, starting in 2007, the price should be at least three times higher".

The news followed last week's surprise announcement by Gazprom CEO Alexei Miller that Belarus would have to pay for gas "at European levels" in 2007. Stanislav Bogdankevich, a former president of Belarus' central bank, warned that if the gas price more than doubled, the economy would be doomed, adding: "Much of our industry depends on cheap gas, especially machine-making and chemical manufacturing. It would be a disaster".

Gazprom had rolled out a series of drastic price hikes to its neighbours in previous months. Armenia in April began paying $110/'000 CM, double its previous rate. Moldova is paying the same as part of a temporary settlement after it refused a $160 price in January and suffered supply cuts.

The March presidential elections in Belarus were the latest evidence of Russia's political support for the country's authoritarian president, Alexander Lukashenko, whom President Putin officially congratulated, while EU and US officials were still crying foul over the voting results. Russia effectively subsidises Belarus to the tune of $4 bn/y with cut-rate oil and gas.

Belarus, a valuable corridor for Russia, accounts for 20% of Russia's gas exports and 50% of its oil exports outside the FSU.

Critics of Gazprom have interpreted price hikes to Ukraine and Moldova as punishment for these states' political turn Westwards, accusing Russia of using gas prices as a weapon. But in doing the same to Belarus, Gazprom is accelerating its long drive to gain control of Belarussian pipeline monopoly Beltransgaz. There are also deep political tensions which belie the public talk of brotherhood and unification. And while talks continue between Belarussian officials and Gazprom, a source at the company warned that a belligerent Belarus might find itself where other resistant states have: out in the cold. At the conference on April 4, Ryazanov reiterated Gazprom's position that pricing decisions were based on market principles - which was precisely what critics used to say Belarus disproved. Ryazanov said: "For us this is not some kind of political question; it's the reality of the economic situation we're in today". But the reality was more complicated. Western criticism that Gazprom had become a political instrument was one of the factors in deciding to raise prices to Belarus. Margarita Balmaceda, an associate at Harvard University's Davis Centre for Russian and Eurasian Studies, in April said Gazprom's latest move was intimately political but had more to do with long-standing bilateral energy disputes than it did with answering the West. Balmaceda said: "If we look at the history of Russian-Belarussian relations, there are times when supplies have been reduced or cut. In all these cases, there have been negotiations afterward, and Lukashenko has always been able to get away in one way or another".

As Balmaceda detailed in a report on energy relations between the two countries, Gazprom first cut supplies to Belarus in 1994, ostensibly over unpaid fuel bills. In late 2002, it withheld half its shipments and demanded a price increase from $30/'000 CM to $150/'000 CM. A partial resolution kept prices from rising, but fell apart in January 2004, when Gazprom cut supplies to Belarus entirely. That crisis ended with Belarussian gas prices rising only to $46/'000 CM. Lukashenko was able to secure a package of Russian loans to offset the increase for domestic consumers. Balmaceda said: "Lukashenko has been very skillful to see that they didn't hurt him as much as they might have". But now that Lukashenko has thoroughly alienated the West, "his field of maneuver has been greatly reduced. He has put all his eggs in the Russian basket not because he loves Russia, not because he wants a real union, but because he's embarked on a political path that only Russia is willing to support". And with Lukashenko's re-election secured, she said, the time had come to pay for Russia's support. She added: "This is certainly an attempt from the Russian side - in my view a very clear one - to cash in on the support it has given Belarus in repression associated with the elections. Now the tone of the relationship is going to be much more dictated by Russia's demands". Higher prices are not an end in themselves for Gazprom but a lever to gain control of what it has wanted from Belarus since 1993: control of Beltransgaz.

In early 2006 it was said Turkey's state-owned pipeline company and gas utility Botas was paying Gazprom $243/'000 CM and Iran $236/'000 CM; Georgia paid just $110, Greece $207, Germany $217 and Austria $221 for the same amount of gas. Gazprom had demanded a price rise to $260, but Botas refused.

Turkish Energy Minister Hilmi Guler on Feb. 3 said Turkey and Russia were planning to extend the sub-Black Sea pipeline - Blue Stream - from the Black Sea port city of Samsun to the Ceyhan oil terminal on the Mediterranean and then to Lebanon and Israel. Guler made his announcement after talks with Gazprom CEO Miller. Miller offered to extend the pipeline westwards to Greece and then to Italy. The Blue Stream pipeline runs under the Black Sea from Russia to Turkey.

Russia supplies 65% of Turkey's gas needs, and the energy ministry on Jan. 30 said it had raised its exports through Blue Stream to 32 MCM/d from an agreed 24 MCM/d. Gazprom and ENI of Italy built Blue Stream as a JV. Turkey is having a crude oil pipeline built from Samsun to Ceyhan (see omt19TurkTradeMay8-06).