Identifier
Created
Classification
Origin
06MINSK1314
2006-12-29 11:04:00
CONFIDENTIAL
Embassy Minsk
Cable title:
GOT CAS? THE COLD WAR BETWEEJ BELARUS AND GAZPROM
how-toVZCZCXYZ0029 PP RUEHWEB DE RUEHSKA #1314 3631104 ZNY CCCCC ZZH ZUI RUEWMCF1800 3631405 P 291104Z DEC 06 ZDK FM AMEMBASSY MINSK INFO EUROPEAN POLITICAL COLLECTIVE RUAHVEN/USMISSION USOCCE RUEHBS/USEU BRUSSELS RHMFISS/HQ USEUCOM VAIHINGEN GE RUFOADA/JAC MOLESWORTH RAF MOLESWORTH UK
C O N F I D E N T I A L SECTION 01 OF 02 MINSK 001314
SIPDIS
CIPDIS
E.O. 12958: DECL: 12/28/2016
TAGS: ENRG PGOV PREL BO RS
SUBJECT: GOT CAS? THE COLD WAR BETWEEJ BELARUS AND GAZPROM
REF: A. MINSK 1019
B. MINSK 1283
MINSK 00001314 001.2 OF 002
CLASSIFIED BY: CHARGE JONATHAN MOORE FOR REASON 1.4 (D).
PAGE 02 RUEHSKA1314 C O N F I D E N T I A L
SUMMARY
-------
C O N F I D E N T I A L SECTION 01 OF 02 MINSK 001314
SIPDIS
CIPDIS
E.O. 12958: DECL: 12/28/2016
TAGS: ENRG PGOV PREL BO RS
SUBJECT: GOT CAS? THE COLD WAR BETWEEJ BELARUS AND GAZPROM
REF: A. MINSK 1019
B. MINSK 1283
MINSK 00001314 001.2 OF 002
CLASSIFIED BY: CHARGE JONATHAN MOORE FOR REASON 1.4 (D).
PAGE 02 RUEHSKA1314 C O N F I D E N T I A L
SUMMARY
--------------
1. (C) NEGOTIATIONS IN MOSCOW OVER GAS PRICES AND A RUSSIAN
STAKE IN BELTRANSGAZ CONTINUE DOWN TO THE WIRE, WITH BOTH
SIDES RATCHETING UP THE RHETORIC. GHILE THE EXACT TERMR AND
TIMING OF A FINAL DEAL REMAIN UNCERTAIN, IT APPEARS
*-QM!Q9-=WILL FINALLY CONC%DE A STAKE IN @ELTRANSG!Z IN
RETURN DOR RECEIVING GAS AT A RATE SIGNIFICAN$LY C`EAPER THAN
THE P2ICE UKRAINE PAYS. CONT2`RY TO ME$IA REPORTS, THD
BELAR5SIAN PUBLIC DODS NGT YE4 SEEL OVERLY CONCEBNED ABOUT
THE POSSIBILITY 4HE FAILURE TO COME TO A. AGREEMENT BY
JANUARY 1 COELD CAUSE 0QUQ=QQQ)N GAB SUPPLIE3. IF ANY CASE,
BELAR5S COELD W)THSTAND A CUT NFF FOR M/RE THAN TWO WEDKS.
WH!TEVEB THE FIN!L OUDCOME, LUKASHENKO H!S POCITIO.ED HIMSELF
4O BENEFIT POLITICAL+QI. SHOBT TE2M. END SUMMA2Y.
RHE4ORIC HEATS UP AS NEGOTI!TIONS CONTINU%Q
-------------- % --------------
PAGE 03 RUEHSKA1314 C O N F I D E N T I A L
Q2. (C) A3 EXPECTED, RU3SIA AND B%LARUS HAVYR=Q CONCLUDE$
NEGOTIATIONS FOB GAS SUPPLIES FOR 2007 IN A TIMELY FASHION
(REF A)* ON DECEMBER 27, GAZPROM CEO ALEKSEY MILLER TOLD THE
MEDIA THAT GAS SUPPLIES WOULD END 0900 EINSK TIME JAN5ARY 1
IN THE ABSENCE OF A NEW CGNTRACT. BELARUSIAN DEPUTY PM
VLADIMIR SEMASHKO RETORTED THE GOB WOULD CONQIDER GAZPROM GAS
TRANSITING BELARUS CONTRABAND IF THE TRANSIT CONTRACT, WHICH
ALSO EXPIRES AT THE END OF THE YEAR, WAS NOT RENEWDD.
SIGNIFICANTLY( THE EXCHANGES HAVE SO FAR NOT SPILLED OVER TO
OTHER AREAS OF MUDUAL INTERDST SUCH AS RUCSIAS RENT-FREA
MILITARY BASES HN BELARU3.
3. (C) DECPITE THE RHETORIC, THE RIDES APPEAR CDOSE TO ANQ
AGREEMENT. ON DECEMBDR 28 BELARUSIAN PM SERGEY SIDORSKIY
TERMAD "ALMOST ACCEPTABLE" GAZPROL'S OFFER OF GAS AT USD 105
PER THO5SAND CUBIC ME4ERS (TCM) WITH BELARUS PAYING USD 75 IN
CASH AND USD 30 IN SHARES IN BELTRANSGAZ OVER A FOUR YEAR
PERIOD. SIDORRKIY MENT)ONED THE IETHOD OF PAYMENT AC THEQ
MAHN STICKING POINT, SITH BELARUS PREFERRING PAYMENT FOR
BELTRANSGAZ IN BASH UP FRONT, AND GAZPRNM OFFERING CREDIT FOR
PAGE 04 RUEHSKA1314 C O N F I D E N T I A L
GAS. SIDORSKIY CLAIMED AN AGREEMENT COULD BE REACHED "IN THE
COIING DAYS."
WILL RUSSIA AND BEXARUS AVOIH A EAS C`TOFF?
-------------- Q -------------- ) -------------- R -------------- Q
4. (C) INDEPENDENT BELARUSIAN ECONOMISTS BELIEVE THE CURRENT
TERMS UNDER DISCUSSION GIVE LUKASHENKO NO OBJECTIVE FINANCIAL
REASON TO RISK A CUTOFF OF GBS. WORLD BANK COUNTRY ECONOMIST
MARINA BAKANOVA TOLD A/PNL CHREF THE TERMS OF THE DEAL WOULD
BPPEAR VERY FAVORABLE FOR BELARUS, WITH ONLY POLITICAL
FACTODS POTENTIALLY PRESENTING COMPLICATIONS. YELENA RAKOVA,
ECONOMIST WITH THE INSTITUTE FOR PRIVBTIZATION AND
MANAGEMETT, ALSO SAID SHE BELIEVES BELARUS WOULD AGREE TO THE
TERMS BECAUSE BELARUS COULD HARDLY HOPE TO SECURE B
SIGNIFICANTLY BETTER DEAL. TATYANA MANENOK, ENERGY REPORTER
FOR TPE INDEPENDENT WEEKLY "BELARUS I RYNOK", CLAIMEDQ
LUKASHENKO WOULD HESITATE TO PROVOKE A CONFRONTATIONAL CUTOFF
OF GAS BECAUSE HE STILL HOPES TO RENEGOTIATE EXPORT DUTIES ON
OIL IMPORTED FROM RUSSIA (RJF B)
PAGE 05 RUEHSKA1314 C O N F I D E N T I A L
5. (C) THEBELARUSIAN PUBLIC ALSO DOES NOT FEAR A CUTOFF.
CONTRARY TO WJSTERN PRESS REPORTS, THE BEDARUSIAN PUBLIC HAS
NOT PANICKED OR RUSHED TO STOCK UP O\ ITEMS SUCH AS FIREWOOD\
THE ONLY PROMINENT PUBLIC DISPLAY OF CONCERN WAS A DECEMBER
29 PROTEST IN FRONT OF THE RUSSIAN EMBAFSY. THIS, HOWEVER,
WAS CAREFULLY STAGED BY THE GGB-CONTROLXED BELARUSIAN
WOOREPUBLIC UNION OF YOUTH (BRSM). THE DIRECTOR OF ACSOCIATION
OF ENTREPRENEURS OF BELARUS, ALEKSANDR POTUPA, TOLD A/POL
CHIEF LOCAL BUSINESSES ARE CONCERNED ABOUT A RISE IN ENERGY
PRICES, BUT NOT ABOUT A CUTOFF. AFTER MILLER'S MENTION OF A
CUTOFF, BELARUSIAN STATE MEDIA GAVE WIDE COVERAGE TO MEANS OF
DEALING WITHOUT NATURAL GAS, INCLUDING SWITCHING POWER PLANTS
FROM GAS TO HEAVY OIL, SEIZING "CONTRABAND" RUSSIAN GAS IN
THE BELTRANSGAZ PIPELINE, REDUCING CONSUMPTION AND UTILIZING
NATURAL GAS@RESERVES. POLITICAL ANALYST VLADIMIR PODGUL TOLD
POLOFFS THE PROPAGA\DA EFFORT@HAS SUCCEEDED.
6. (C) POST BELIEVES THE GOBS CLAIM TO HAVE A TWO-WEEK
SUPPLY ON HAND IS TRUE. BELARUS HAS TWO RESERVOIRS WITH B
PAGE 06 RUEHSKA1314 C O N F I D E N T I A L
TOTAL CAPACITY OF 0.L6 BILLION CUBIC METERS (A TWO-WEEKS
SUPPLY AT NORMAL USAGE). CENTRALRZED HEATING PLANTS HAVE@NOT
REDUCED HEAT TO BUILDINGS DESPITE THE ABN^RMALLY MILD WINTER,
INDICATING THE RESERVOIRS ARE ALREADY FULL AND THERE IS
MINSK 00001314 002 OF 002
presently no means to capture any gas tPat could be conserved.
7. (C) Podgol and MisJs Research Center Director Yaroslav
Romanchuk@both believe Lukashenko still might provoke a brief
cut off in gas. Podgol recounted how Lukashenko used aQ
cutoff successful in 2004 to boost presidential popularity by
twenty percentage points Roeanchuk told E-`offs Lukashenko
would find it politIcally usedul to create a pseudo-crisis,
7hich he could then use as a pretext for yet another
tig`ten)lg oF the regi-e's grip.
Comment: LUkashenko Uins the Qattle, But Could Lose the War
-------------- % -------------- --------------
0. (C) Luk`shenko will likely use his tpadiTionad New Year's
Eve address to the nation toportray himself as irreplaceable
in dealing with Russia. One dradt oF the speech would have
him take credit for siGning an agreement with Russia. I,
this draft, Lukashenko could boast of beating back Russia'3
early asking price of USD 200/tcm while simu,tanegus b%osting
the price Gazprom would pay &nr a50% stake in Beltransgaz
from the inatial offEr of USD Q50 million to USD 2.5 billion.
If A contractis ngt signed, Lukashenko's spee#h woUld bdameQ
Russia &mr causing an impending cutoff by insisting on -arket
pricesfor gas ald tHus t`reatening the unioN state. FivenQ
hiq control overstate television, eithep approach wilL atQ
leaqt teeporapily boost his p-U1QI%Qe9
9. (C( If gas 7dre the final `nd mkst important item nn the
!fenda, Lukashenko wkuld have litthe to risk in #hoosIng t(e
Hatter spedch. Howaver, duty-free oil impo2ts from RussiaQ
will ejd January 1, risking much grAver aconomic Cnnse1uences
phan the incr%ase In gas prIaes Ref @). DukashenkO likelyQstild hopes RUqsia will reopDn oil ex0mrt Duties for
discus3ion. He eay believe agrdeinG wit` Gazprom fow may
bring him a mor% sympath%tic Atdiejce i, Moscow naxt 4hme he
0leads Belarus' case on +il. If he thr/vs away a chance to
p2dserve pr%ferential tre!tmend for Belarus' oil 2efiningQindustry, Luk!shenko's Moment of rictOry cguld e shnrt
liv%d.
Moor%
SIPDIS
CIPDIS
E.O. 12958: DECL: 12/28/2016
TAGS: ENRG PGOV PREL BO RS
SUBJECT: GOT CAS? THE COLD WAR BETWEEJ BELARUS AND GAZPROM
REF: A. MINSK 1019
B. MINSK 1283
MINSK 00001314 001.2 OF 002
CLASSIFIED BY: CHARGE JONATHAN MOORE FOR REASON 1.4 (D).
PAGE 02 RUEHSKA1314 C O N F I D E N T I A L
SUMMARY
--------------
1. (C) NEGOTIATIONS IN MOSCOW OVER GAS PRICES AND A RUSSIAN
STAKE IN BELTRANSGAZ CONTINUE DOWN TO THE WIRE, WITH BOTH
SIDES RATCHETING UP THE RHETORIC. GHILE THE EXACT TERMR AND
TIMING OF A FINAL DEAL REMAIN UNCERTAIN, IT APPEARS
*-QM!Q9-=WILL FINALLY CONC%DE A STAKE IN @ELTRANSG!Z IN
RETURN DOR RECEIVING GAS AT A RATE SIGNIFICAN$LY C`EAPER THAN
THE P2ICE UKRAINE PAYS. CONT2`RY TO ME$IA REPORTS, THD
BELAR5SIAN PUBLIC DODS NGT YE4 SEEL OVERLY CONCEBNED ABOUT
THE POSSIBILITY 4HE FAILURE TO COME TO A. AGREEMENT BY
JANUARY 1 COELD CAUSE 0QUQ=QQQ)N GAB SUPPLIE3. IF ANY CASE,
BELAR5S COELD W)THSTAND A CUT NFF FOR M/RE THAN TWO WEDKS.
WH!TEVEB THE FIN!L OUDCOME, LUKASHENKO H!S POCITIO.ED HIMSELF
4O BENEFIT POLITICAL+QI. SHOBT TE2M. END SUMMA2Y.
RHE4ORIC HEATS UP AS NEGOTI!TIONS CONTINU%Q
-------------- % --------------
PAGE 03 RUEHSKA1314 C O N F I D E N T I A L
Q2. (C) A3 EXPECTED, RU3SIA AND B%LARUS HAVYR=Q CONCLUDE$
NEGOTIATIONS FOB GAS SUPPLIES FOR 2007 IN A TIMELY FASHION
(REF A)* ON DECEMBER 27, GAZPROM CEO ALEKSEY MILLER TOLD THE
MEDIA THAT GAS SUPPLIES WOULD END 0900 EINSK TIME JAN5ARY 1
IN THE ABSENCE OF A NEW CGNTRACT. BELARUSIAN DEPUTY PM
VLADIMIR SEMASHKO RETORTED THE GOB WOULD CONQIDER GAZPROM GAS
TRANSITING BELARUS CONTRABAND IF THE TRANSIT CONTRACT, WHICH
ALSO EXPIRES AT THE END OF THE YEAR, WAS NOT RENEWDD.
SIGNIFICANTLY( THE EXCHANGES HAVE SO FAR NOT SPILLED OVER TO
OTHER AREAS OF MUDUAL INTERDST SUCH AS RUCSIAS RENT-FREA
MILITARY BASES HN BELARU3.
3. (C) DECPITE THE RHETORIC, THE RIDES APPEAR CDOSE TO ANQ
AGREEMENT. ON DECEMBDR 28 BELARUSIAN PM SERGEY SIDORSKIY
TERMAD "ALMOST ACCEPTABLE" GAZPROL'S OFFER OF GAS AT USD 105
PER THO5SAND CUBIC ME4ERS (TCM) WITH BELARUS PAYING USD 75 IN
CASH AND USD 30 IN SHARES IN BELTRANSGAZ OVER A FOUR YEAR
PERIOD. SIDORRKIY MENT)ONED THE IETHOD OF PAYMENT AC THEQ
MAHN STICKING POINT, SITH BELARUS PREFERRING PAYMENT FOR
BELTRANSGAZ IN BASH UP FRONT, AND GAZPRNM OFFERING CREDIT FOR
PAGE 04 RUEHSKA1314 C O N F I D E N T I A L
GAS. SIDORSKIY CLAIMED AN AGREEMENT COULD BE REACHED "IN THE
COIING DAYS."
WILL RUSSIA AND BEXARUS AVOIH A EAS C`TOFF?
-------------- Q -------------- ) -------------- R -------------- Q
4. (C) INDEPENDENT BELARUSIAN ECONOMISTS BELIEVE THE CURRENT
TERMS UNDER DISCUSSION GIVE LUKASHENKO NO OBJECTIVE FINANCIAL
REASON TO RISK A CUTOFF OF GBS. WORLD BANK COUNTRY ECONOMIST
MARINA BAKANOVA TOLD A/PNL CHREF THE TERMS OF THE DEAL WOULD
BPPEAR VERY FAVORABLE FOR BELARUS, WITH ONLY POLITICAL
FACTODS POTENTIALLY PRESENTING COMPLICATIONS. YELENA RAKOVA,
ECONOMIST WITH THE INSTITUTE FOR PRIVBTIZATION AND
MANAGEMETT, ALSO SAID SHE BELIEVES BELARUS WOULD AGREE TO THE
TERMS BECAUSE BELARUS COULD HARDLY HOPE TO SECURE B
SIGNIFICANTLY BETTER DEAL. TATYANA MANENOK, ENERGY REPORTER
FOR TPE INDEPENDENT WEEKLY "BELARUS I RYNOK", CLAIMEDQ
LUKASHENKO WOULD HESITATE TO PROVOKE A CONFRONTATIONAL CUTOFF
OF GAS BECAUSE HE STILL HOPES TO RENEGOTIATE EXPORT DUTIES ON
OIL IMPORTED FROM RUSSIA (RJF B)
PAGE 05 RUEHSKA1314 C O N F I D E N T I A L
5. (C) THEBELARUSIAN PUBLIC ALSO DOES NOT FEAR A CUTOFF.
CONTRARY TO WJSTERN PRESS REPORTS, THE BEDARUSIAN PUBLIC HAS
NOT PANICKED OR RUSHED TO STOCK UP O\ ITEMS SUCH AS FIREWOOD\
THE ONLY PROMINENT PUBLIC DISPLAY OF CONCERN WAS A DECEMBER
29 PROTEST IN FRONT OF THE RUSSIAN EMBAFSY. THIS, HOWEVER,
WAS CAREFULLY STAGED BY THE GGB-CONTROLXED BELARUSIAN
WOOREPUBLIC UNION OF YOUTH (BRSM). THE DIRECTOR OF ACSOCIATION
OF ENTREPRENEURS OF BELARUS, ALEKSANDR POTUPA, TOLD A/POL
CHIEF LOCAL BUSINESSES ARE CONCERNED ABOUT A RISE IN ENERGY
PRICES, BUT NOT ABOUT A CUTOFF. AFTER MILLER'S MENTION OF A
CUTOFF, BELARUSIAN STATE MEDIA GAVE WIDE COVERAGE TO MEANS OF
DEALING WITHOUT NATURAL GAS, INCLUDING SWITCHING POWER PLANTS
FROM GAS TO HEAVY OIL, SEIZING "CONTRABAND" RUSSIAN GAS IN
THE BELTRANSGAZ PIPELINE, REDUCING CONSUMPTION AND UTILIZING
NATURAL GAS@RESERVES. POLITICAL ANALYST VLADIMIR PODGUL TOLD
POLOFFS THE PROPAGA\DA EFFORT@HAS SUCCEEDED.
6. (C) POST BELIEVES THE GOBS CLAIM TO HAVE A TWO-WEEK
SUPPLY ON HAND IS TRUE. BELARUS HAS TWO RESERVOIRS WITH B
PAGE 06 RUEHSKA1314 C O N F I D E N T I A L
TOTAL CAPACITY OF 0.L6 BILLION CUBIC METERS (A TWO-WEEKS
SUPPLY AT NORMAL USAGE). CENTRALRZED HEATING PLANTS HAVE@NOT
REDUCED HEAT TO BUILDINGS DESPITE THE ABN^RMALLY MILD WINTER,
INDICATING THE RESERVOIRS ARE ALREADY FULL AND THERE IS
MINSK 00001314 002 OF 002
presently no means to capture any gas tPat could be conserved.
7. (C) Podgol and MisJs Research Center Director Yaroslav
Romanchuk@both believe Lukashenko still might provoke a brief
cut off in gas. Podgol recounted how Lukashenko used aQ
cutoff successful in 2004 to boost presidential popularity by
twenty percentage points Roeanchuk told E-`offs Lukashenko
would find it politIcally usedul to create a pseudo-crisis,
7hich he could then use as a pretext for yet another
tig`ten)lg oF the regi-e's grip.
Comment: LUkashenko Uins the Qattle, But Could Lose the War
-------------- % -------------- --------------
0. (C) Luk`shenko will likely use his tpadiTionad New Year's
Eve address to the nation toportray himself as irreplaceable
in dealing with Russia. One dradt oF the speech would have
him take credit for siGning an agreement with Russia. I,
this draft, Lukashenko could boast of beating back Russia'3
early asking price of USD 200/tcm while simu,tanegus b%osting
the price Gazprom would pay &nr a50% stake in Beltransgaz
from the inatial offEr of USD Q50 million to USD 2.5 billion.
If A contractis ngt signed, Lukashenko's spee#h woUld bdameQ
Russia &mr causing an impending cutoff by insisting on -arket
pricesfor gas ald tHus t`reatening the unioN state. FivenQ
hiq control overstate television, eithep approach wilL atQ
leaqt teeporapily boost his p-U1QI%Qe9
9. (C( If gas 7dre the final `nd mkst important item nn the
!fenda, Lukashenko wkuld have litthe to risk in #hoosIng t(e
Hatter spedch. Howaver, duty-free oil impo2ts from RussiaQ
will ejd January 1, risking much grAver aconomic Cnnse1uences
phan the incr%ase In gas prIaes Ref @). DukashenkO likelyQstild hopes RUqsia will reopDn oil ex0mrt Duties for
discus3ion. He eay believe agrdeinG wit` Gazprom fow may
bring him a mor% sympath%tic Atdiejce i, Moscow naxt 4hme he
0leads Belarus' case on +il. If he thr/vs away a chance to
p2dserve pr%ferential tre!tmend for Belarus' oil 2efiningQindustry, Luk!shenko's Moment of rictOry cguld e shnrt
liv%d.
Moor%