Countdown to Belarus shutdown begins as gas bill unpaid

A shutdown of gas supplies to Belarus has been ordered after talks on the nation’s unpaid gas debts with Gazprom have failed to reach agreement.

Russian president Dmitry Medvedev has spoken with Gazprom CEO Alexei Miller on Monday morning about progress in talks over the weekend and was told that although Belarus acknowledges it has a debt to Russia’s gas export monopoly the nation lacks currency to repay it.

"Belarus recognizes the gas debt but offers to pay it back with machines, equipment and other commodities."

The Russian President replied that Gazprom could not accept offers of repayment in kind.

“They should pay according to the contract – and it assumes the payment should be made using a foreign currency. Everything else contradicts our financial legislation. Gazprom cannot take anything else as a payment. Pies, butter, cheese or blinis or anything else are not real means of payment – and our Belarussian partners should understand this.”

The President proposed continuing the talks, and emphasized the need for maintaining contact with Belarus representatives, but understood the need for a clear management decision. The Gazprom CEO indicated that it planned reduce gas supplies to Belarus proportionately to the size of the debt, and that this would occur on Monday morning.

Belarus has an estimated $200 million gas debt to the Russian gas export monopoly, and has challenged Gazprom’s claim. Russia has rejected a claim from Belarus President Aleksandr Lukashenko that Russia provide it with cheap oil and gas as part of the customs union deal to come into force July 1.

A short time later Miller announced an initial 15% cut in supplies, which will rise to 85%.

"The debt has not been paid and as of 10:00 am Moscow time June 21, 2010, a limited gas supply regime has been introduced at 15% of total planned daily gas deliveries with a gradual increase of the limit to 85% proportional to the debt."

Gazprom spokesman, Sergei Kupriyanov, told Interfax the move to 85% would depend on negotiations with Belarus.

"We started at 15% in order to reach a limit of 85% gradually. The rate of decrease will depend on Belarus' constructive negotiating position and readiness to solve the debt problem."