Result of negotiations in Moscow: Gas price is “comparable to European one”, loan not given yet

The results of the talks between Alexander Lukashenka and Dmitry Medvedev are kept secret. But mass media are learning some details: what the gas price for Belarus would be and whether Russia would give 3.5 billion dollar loan.

According to the results of the talks of the two presidents in Moscow, the sides have agreed upon “principles of Russian gas deliveries” to Belarus in 2009. As informed by BBC, Gazprom’s official representative Sergei Kupriyanov explained that Belarus will buy gas at a price “comparable to the prices for European partners”. The new gas price for Belarus hasn’t been revealed yet. The contract for gas deliveries and gas transit in 2007-2011 was signed by Russian Gazprom and Belarusian Beltransgaz in 2006.

Last week the Energy Ministry of Russia signed a common balance with Belarusian partners, according to which in 2009 Russia is to deliver to Belarus 22.1 billion cubic metres of gas. On the eve of the meeting it was informed that Belarus wanted to bargain acceptable price for Russian gas in 2009.

Hostages of formula

Russia has agreed to allow a discount for Belarus in gas prices for 2009, as because of the peculiarities of the today’s contract it could overpay about $1.7 billion, “Vedomosti” writes today.

The results of the talks are officially held confidential. Only one thing is clear, there will be concessions. As a source close to Lukashenka’s administration says, Medvedev promised that gas price in 2009 would be “acceptable”, and it was to Lukashenka’s satisfaction. It is not clear what Russia had been promised in return.

In 2008 Belarus saved about $750 million thanks to the peculiarity of contract with Gazprom, but in the next year about $1.7 billion could be lost because of the same peculiar properties, Mikhail Korchemkin, East European Gas Analysis director calculated. The essence of the price formula for the year 2009, under which Belarus signed two years ago, is the following: quarterly indexation following the European gas prices in the previous quarter (minus 30% customs duty and difference in transportation expenses) with 20% discount. But according to the contract, the price over the entire year shouldn’t differ from the level of the first quarter for more than 7% (that is, the most important thing in the formula is the price in the beginning of the year).

This year the limit of 7% was very beneficial for Belarus: and now, when gas for Europe costs more than %500 per 1,000 cubic metres, Belarus paid for it only $127.8, explains one of Gazprom managers (according to the formula the cost would be more than $200, Korchemkin said, but in the first quarter the price was a little less than $119). And in the next year the situation would be the opposite: Gazprom’s European prices for gas were record-breaking in the 4th quarter of this year (they were growing after oil quotations with a delay of 6-9 months). That is why, according to Korchemkin’s estimate, since January 1 gas price for Belarus is to soar to about $259 per 1,000 cubic metres. By the end of the year 2009 gas under the formula could become cheaper up to $70 per 1,000 cubic metres (following the decreasing prices for Europe). But because of the high price in the 1st quarter it wouldn’t happen. And the average gas price for Belarus, factored in the draft budget of Gazprom for the next year is about $240, the company’s representative said. That is why the overpayment of about $1.7 billion appeared.

No talks at all at company level yesterday

As a source of “Vremya novostei” underlines, the price for the next year is still to be founded on the formula fixed in the contract, that is, it can be about $160. However, neither the Kremlin nor Gazprom confirmed that figure yesterday.

Yesterday there were no talks at the level of companies at all. And there were no representatives of Gazprom and Beltransgaz in the Kremlin. However, according to some reports, after the talks of the two presidents, prime ministers of the both countries joined them. It’s a dramatic confirmation of the fact that no matter how many times Moscow tried to announce gas prices in the CIS countries to be “outside politics”, their future is still decided in the offices of high bureaucrats.

On the other hand, according to information of “Vremya novostei”, experts of the concern planned a much higher price for Belarus in the budget for the year 2009 since January 1, about $220 per thousand cubic metres. Moreover, this level was used by the Russian side in the talks. It made Lukashenka before his visit to Moscow openly demanded his country not to be equalled to Germany (however, yesterday he refrained from such analogies).

The point is, under the contract gas price is define by the previous 6-9 months, or the period when it reached its absolute peak in Europe, $400-500 per 1,000 cubic metres. Proceeding from it, $220-230 at the Belarusian border desired by Gazprom would be reached. European prices are to come down since the second quarter. As long as Minsk could initiate reconsideration of the price only one time, this effect could be felt by the Belarusian side not earlier than the middle of the year, and in full measure only in autumn.

Loan not given yet

On the day of the meeting the leaders of the two states deputy head of the Finance Minister of Russia Dzmitry Pankin told to journalists that Belarus sent to Russia a letter with a request to grant a new loan of 100 billion rubles. The Belarusian authorities state that in exchange to this sum they are ready to switch to Russian ruble in bilateral trade. Russia has given financial support to Belarus many times. In the middle of November 2008 Moscow granted a $2 billion loan to Minsk, and its first tranche, $1 billion, has been received already. The second tranche was planned to be received before February 28. In December 2007 Russia gave Belarus another loan of $1.5 billion for 15 years.

According to the newspaper “Vremya novostei”, the issue of crediting was discussed during the talks, but the final decision hadn’t been adopted. In any case, a meaningful and businesslike talk about allocation of means is to be continued for outlining the commercial terms of the loan. It cannot be excluded also that this topic would be connected with transition to payment for Russian gas in rubles. Such a possibility had been entertained by Gazprom right after Mr Medvedev in his address to the Federal Assembly called upon exporting oil and gas for rubles (however, the ruble has gone down in value considerably as compared to dollar and Euro since then).