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Saturday, December 3, 2016

The Minsk gas risks repeating mistakes of Kiev


Belarus is starting to look more like Ukraine – at least in terms of pressure on Russia regarding gas. Minsk, as his time and Kiev refuses to recognize the existence of the debt to Gazprom. Belarus, now do not like the formula of gas prices, previously approved in the contract with Russia.

The debt of Belarus to Gazprom for gas deliveries in the first four months of this year (January – April) exceeds $ 125 million, said Thursday the Russian Minister of energy Alexander Novak.

“Belarus is too spoiled. Gazprom is absolutely right, not wanting to give a discount for this country”

Minsk, in turn, said that does not recognize the existence of the debt to Gazprom. “We have no debt-no, we pay in accordance with the intergovernmental agreement,” – said the Minister of energy of Belarus Vladimir Potupchik.

According to the Patupchyk, Russia and Belarus have different interpretations of the intergovernmental agreement. The dispute concerns gas prices. Belarusian enterprises pay for gas at a lower price than Gazprom puts under the formula prescribed in the contract. Since 2008 gas price for Belarus is calculated quarterly according to the formula given indices of change of the prices for gasoil and fuel oil. From 2013, the formula was laid down in the intergovernmental agreement.

“Russia believes that there is a price “Yamal”, and we believe that from January 1, 2015 must act equal market prices”, – said the head of the Belarusian Ministry of energy.

To resolve the dispute will be the court. Belarusian “daughter” of Gazprom may 2 has filed a lawsuit in the arbitration court at the Belarusian chamber of Commerce and industry to the gas supply company of the country about the debt for the gas supplied. The only buyer of gas of Gazprom in Belarus is its absolute “a daughter” “Gazprom transgaz Belarus (formerly Beltransgaz, which was bought by Gazprom in 2013).

Moscow’s Position

Russia insists on the execution of what is prescribed in the contract. “We have the same formula with Belarus is very simple. We take the price of production in the Yamalo-Nenets Autonomous district and to it add the price of transportation, nothing more. And this principle has been signed”, – explained the Deputy Chairman of the management Board of the company Valery Golubev.

There are different formulas for gas pricing. “There are formulas, for example, associated with the oil ratios, while Belarus went the other way, they do not go to a formula tied to oil equivalents, they wanted the price in Russia plus transportation. Today Belarusian colleagues say – no, we want to make it different. Well, you have to be consistent,” – said a top Manager of Gazprom.

Based on the contract formula, the price of gas for Belarus is reduced. So, in the beginning of 2014, thousand cubic meters was worth $ 165 in 2015-m – 142 USD.

The Position Of Belarus

Despite the low cost of gas, Belarus since the beginning of this year started to ask for a discount on fuel. In January Deputy Prime Minister Vladimir Semashko held talks with Deputy Prime Minister of Russia Arkady Dvorkovich on this subject. However, the parties are unable to reach agreements.

Minsk believes that it is entitled to pay less for Russian gas due to the rising dollar, the currency in which contract are payments for gas with Russia.

At the beginning of 2014, the gas cost for Belarus $ 165 per thousand cubic meters at the rate of the Russian ruble 32-33 per dollar. Given that the dollar is now worth more than 60 rubles, the gas for Belarus will cost $ 80 per thousand cubic meters, explained earlier, Prime Minister of Belarus Andrei Kobyakov. Today Minsk is called “fair” price for Russian gas at $ 73 per thousand cubic meters. This statement was made by Belarusian energy Minister.

The logic of Minsk is that when the dollar exchange rate of 32 rubles, the price of Russian gas when translated into rubles was 5280 rubles (165 dollars) per thousand cubic meters. This ruble price per thousand cubic meters, Minsk considers to be fair and save. When the dollar exchange rate of 65 rubles (as of now) the price of gas turns 81 dollar, with the dollar at 72 rubles to 73 USD per thousand cubic meters. In Belarus, generally considered the unfair payments for products in Russian rubles, and for energy – in dollars. Despite the contract, which contradicts this.

Belarus now pays 142 USD per thousand cubic meters. This is the lowest price not only in Europe but also in other CIS countries and even in other countries of the Eurasian Union, said the Deputy Director of analytical Department of “Alpari” Natalia Milchakova. In Europe, the average price of gas is $ 180-190 per thousand cubic meters, in the CIS – 140-150 dollars.

But Minsk is not happy with the fact that in 2013, the difference between the price of Russian gas for Belarus for Europeans was more striking. Then in Europe, Russian gas cost $ 350 per thousand cubic meters, and Belarus – 160 dollars, the benefit of Minsk accounted for $ 190. Now Europe buys Russian gas at an average of $ 180 per thousand cubic meters and Minsk – for $ 140. The difference was reduced almost five times.

Gas prices in the dollars. Russia thus has protected itself from currency risks. But these risks now have to carry Minsk that he doesn’t like. As soon as market conditions made the contract with Gazprom is not as profitable for Belarus as before, Minsk has decided to challenge its implementation.

Belarus is beginning to behave like Kiev, which, by signing the 2009 gas contract with Moscow with the agreed pricing formula, ceased to accept this contract and the pricing formula, as soon as oil prices went up (and then gas). Ukraine also stopped paying to Gazprom for already supplied gas, from-for what Russia had in 2014 to transfer the delivery of natural gas on an advance payment. As a result, Ukraine managed to survive two winters only by the warm weather, the mediation of the EU in gas talks and the good will of Gazprom, which agreed on a “winter package”. But in the case of Ukraine, Moscow did not want to lose the confidence of European consumers that could easily organize Kyiv by expanding the gas crisis similar to 2008-2009, the Issue of Ukrainian debt for non-payment for delivered gas also is decided in court (in the Stockholm arbitration court considers the claims of the two parties).

Speculation equal profitability

As for gas prices referenced by Potupchik, the parties had indeed agreed to get in touch with them since the beginning of 2015. But, says the Deputy Director of the national energy security Fund Alexei Grivach, this item was not spelled out in the contract.

Secondly, the essence of equal was not to make the price of gas for Belarus is equal to the cost of fuel in Russia, excluding transportation. The intention was that Russia and Belarus followed out by 2015 on the European prices excluding shipping. To do this, the price of gas in Russia was supposed to increase by 15% annually (according to previous calculations). Accordingly, the price of gas for Belarus should grow. However, Russia stalled the process of bringing domestic gas prices to European (export). The cost of gas in Russia is on average $ 65 per thousand cubic meters, said Grivach.

Thus, Minsk speculates equal prices from 2015 to the public, but in court to defend a lower cost of fuel this argument will not work.

“Belarus is too spoiled”

The arguments of Gazprom in a dispute with Minsk Belarusian stronger, said the Deputy Director of analytical Department of “Alpari” Natalia Milchakova. First, they are economically justified, while the authorities of Belarus do not offer any convincing explanation of his position, except to exchange rates. Secondly, Belarus has already given the biggest discount on the entire Eurasian space.

“Belarus is too spoiled. Gazprom is absolutely right, not wanting to give a discount for this country. In our opinion, in the conditions of crisis the Belarusian authorities just want at the expense of Russia and simultaneously solve the problem of output growth and lower inflation,” – said the expert.

“In fact, Gazprom would be it only takes one argument, which is formulated by Prime Minister Dmitry Medvedev, as President: “do not borzet” – ironically Milchakova.

Given the economic rightness of Gazprom, as well as all the friendly relations of Belarus with Russia, it is likely that the parties will eventually sign a peace agreement, and Minsk pay the debt. To weaken the positions of Gazprom in court can only policy. “If Lukashenko is blackmailing Russia by rapprochement with Europe, then it is possible that Gazprom and its shareholder-the state “SAG” and will fulfill the requirements of Belarus, but such a scenario seems unlikely,” the expert concludes Alpari.

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