Belarus halts transit of gas to Europe

Belarus has halted the transit of gas to Europe.

Saying that dispute was turning into a ‘gas war’, Belarussian president, Aleksander Lukashenko, took the step after Russia’s state-owned monopoly Gazprom announced that it was doubling the cut in supplies to Belarus to 30 percent of normal volumes on Tuesday.

Following an order from Russian President Dmitry Medvedev, Gazprom reduced gas supplies to Belarus on Monday, starting with a 15% cut in daily deliveries that Gazprom said would gradually rise to 85%.

“I have ordered my government to stop transit through Belarus as long as Gazprom does not pay for the transit,” Mr. Lukashenko said in a meeting with Russia’s Foreign Minister, Sergey Lavrov.

Belarusian First Deputy Energy Minister Eduard Tovpinets has said earlier that Gazprom owes some $200 million to Belarus for gas transit fees for deliveries to Europe; roughly the same amount that Gazprom says Belarus owes for gas deliveries.

Gazprom officials denied not paying transit fees to Belarus, saying that Belarus had been hindering payment of the transit fees in order to gain leverage in the dispute.

Gazprom CEO Alexei Miller said that Tovpinets’ comments were an attempt to draw attention away from Belarus’ own debts.

Belarus is a transit country for a fifth of Russia gas exports to Europe.  Russia has stated that gas flows to Europe would continue unhindered, with Ukraine, the main carrier of Europe’s Russian gas, agreeing to move additional supplies through its pipelines.

There are strong political overtones to the dispute.

Relations between Russia and Belarus are increasingly acrimonious. Formerly a strong ally of Russia, Mr. Lukashenko has recently refused to go along with several Kremlin initiatives, including a customs union with Russia and Kazakhstan.

Belarus wants to attract foreign investors to its energy and petrochemical industries and expand economic and political ties with the European Union, a move that irks Russian leaders.  Mr. Lukashenko has also provoked Moscow by harboring Kurmanbek Bakiyev, the former president of Kyrgyzstan, who was unseated after an uprising that Russia appeared to encourage.

Belarus refuses to pay the Russian gas price, which is set at $169 per 1,000 cubic meters in the first quarter of the year and $185 in the second quarter. Instead, it has been paying $150 since January 1.

This conflict has raised further questions European energy security and it’s reliance on Russian energy supplies. Gazprom’s shut gas supplies to Ukraine last year in a  pricing dispute, leaving millions of European homes without heat.