Identifier
Created
Classification
Origin
08VILNIUS202
2008-04-07 14:52:00
UNCLASSIFIED
Embassy Vilnius
Cable title:
RUSSIA NOT BUDGING ON BELARUS GAS PRICES
how-toVZCZCXRO5367 RR RUEHLN RUEHVK RUEHYG DE RUEHVL #0202 0981452 ZNR UUUUU ZZH R 071452Z APR 08 FM AMEMBASSY VILNIUS TO RUEHC/SECSTATE WASHDC 2138 INFO RUCNCIS/CIS COLLECTIVE RUEATRS/TREASURY DEPT WASHDC RUEHVEN/USMISSION USOSCE 0200 RUEHBS/USEU BRUSSELS RHMFISS/HQ USEUCOM VAIHINGEN GE RUFOADA/JAC MOLESWORTH RAF MOLESWORTH UK
UNCLAS VILNIUS 000202
SIPDIS
AMEMBASSY MINSK SENDS
SIPDIS
E.O.12356: N/A
TAGS: ECON PGOV ENRG BO
SUBJECT: RUSSIA NOT BUDGING ON BELARUS GAS PRICES
UNCLAS VILNIUS 000202
SIPDIS
AMEMBASSY MINSK SENDS
SIPDIS
E.O.12356: N/A
TAGS: ECON PGOV ENRG BO
SUBJECT: RUSSIA NOT BUDGING ON BELARUS GAS PRICES
1. Russia's Deputy Minister of Economic Development and Trade
Andrey Belousov told a news conference in Minsk on March 21 that the
price of natural gas to be supplied to Belarus in the second quarter
of 2008 will be USD 128 per thousand cubic meters. The price was
calculated in compliance with the formula agreed upon by Russia and
Belarus in December 2006 and, despite the GOB's negotiating efforts,
will not be adjusted downwards. For 2008, the base price for
Belarus will be 67 per cent of Gazprom's price for European
customers, excluding transportation costs and Russia's 30 percent
export duty. The rate will increase to 80 per cent of the European
rate in 2009, and will reach parity in 2011.
Speculation Abounds
--------------
2. There have been increased levels of speculation about natural
gas prices for Belarus in recent weeks, ranging from Prime Minister
Sidorskiy's claim of "no price increase" to Aleksandr Lukashenko's
warning that "prices will double." Russia's Ambassador to Belarus
Aleksandr Surikov weighed in, stating that the price of USD 128 set
for the second quarter of 2008 will not change until the end of the
year.
GOB Guessed Wrong On Gas
--------------
3. In 2006 the GOB prepared budgets based on the Russian
government's estimates of 2007-2009 world gas and oil prices, and
concluded it would pay no more than USD 140 through 2009. New
estimates now show the price could rise to USD 203. Such a
difference between budgeted figures and actual prices will cause
significant shortfalls in the Belarusian budget, especially
considering that 97.9 percent of Belarus' electricity is generated
using natural gas. Senior officials of the Belarusian government
have engaged in talks with Gazprom since late 2007 trying to reach
compromise on the pricing schedule to no avail.
Comment
--------------
4. The GOB will certainly continue its efforts to mitigate the gas
price increase through further negotiations with Gazprom. Russia
might make some concessions in the form of loans, but is less likely
to budge on price hikes. As a result, the GOB will need to find new
ways to deal with the resulting increased budget deficits.
Moore
Cloud
SIPDIS
AMEMBASSY MINSK SENDS
SIPDIS
E.O.12356: N/A
TAGS: ECON PGOV ENRG BO
SUBJECT: RUSSIA NOT BUDGING ON BELARUS GAS PRICES
1. Russia's Deputy Minister of Economic Development and Trade
Andrey Belousov told a news conference in Minsk on March 21 that the
price of natural gas to be supplied to Belarus in the second quarter
of 2008 will be USD 128 per thousand cubic meters. The price was
calculated in compliance with the formula agreed upon by Russia and
Belarus in December 2006 and, despite the GOB's negotiating efforts,
will not be adjusted downwards. For 2008, the base price for
Belarus will be 67 per cent of Gazprom's price for European
customers, excluding transportation costs and Russia's 30 percent
export duty. The rate will increase to 80 per cent of the European
rate in 2009, and will reach parity in 2011.
Speculation Abounds
--------------
2. There have been increased levels of speculation about natural
gas prices for Belarus in recent weeks, ranging from Prime Minister
Sidorskiy's claim of "no price increase" to Aleksandr Lukashenko's
warning that "prices will double." Russia's Ambassador to Belarus
Aleksandr Surikov weighed in, stating that the price of USD 128 set
for the second quarter of 2008 will not change until the end of the
year.
GOB Guessed Wrong On Gas
--------------
3. In 2006 the GOB prepared budgets based on the Russian
government's estimates of 2007-2009 world gas and oil prices, and
concluded it would pay no more than USD 140 through 2009. New
estimates now show the price could rise to USD 203. Such a
difference between budgeted figures and actual prices will cause
significant shortfalls in the Belarusian budget, especially
considering that 97.9 percent of Belarus' electricity is generated
using natural gas. Senior officials of the Belarusian government
have engaged in talks with Gazprom since late 2007 trying to reach
compromise on the pricing schedule to no avail.
Comment
--------------
4. The GOB will certainly continue its efforts to mitigate the gas
price increase through further negotiations with Gazprom. Russia
might make some concessions in the form of loans, but is less likely
to budge on price hikes. As a result, the GOB will need to find new
ways to deal with the resulting increased budget deficits.
Moore
Cloud