400 dollars for gas from next year

Gazprom declared new gas prices for Europe: the average price can exceed USD 400 per 1,000 cu m by the end of 2008. Experts don’t exclude Gazprom will offer the same prices to Belarus and Ukraine. Experts think Russia will demand Belarus to allow Russian investors to the economy of our country in return for favourable conditions of supplies. Russian president Dmitry Medvedev will probably discuss this in Brest.

An average export price of Russian gas for European consumers will amount to USD 401-402 per 1,000 cu m in 2008. Gazprom is going to export more than 163 bln cubic meters of natural gas to non-CIS countries and 50 bln cubic meters to the CIS and Baltic countries. Deputy CEO of the gas monopolist Alexander Medvedev said it on Wednesday, Gazeta.ru runs.

Nevertheless, experts consider this price to be rather reasonable. “As Gazprom forecasts, gas prices will increase by 47 per cent against 2007, prices of Brent oil has increased by 45 per cent over half year,” Natalya Milchakova, director of the department for fundamental analyse at Otkrytie Financial Corporation, said. “As a rule, natural gas is cheaper than oil when converted into oil equivalent, so its growth rates are behind the oil prices growth rates. Gas export prices should follow the oil market prices.”

It’s worthy to note that according to the forecast of the expert, at last gas for Ukraine will be delivered at an average European price and will cost USD 400 per 1,000 cu m against USD 179 now. President of Russia Dmitry Medvedev has already warned Ukraine about it at an informal CIS summit in St. Petersburg.

However, if most of the European countries have developed economy to manage new prices, Russia’s nearest neighbours Ukraine and Belarus are apparently not ready for it.

As politologists suppose, Russia will be able to impose more pressure. “Transition to the European model of gas payment means prices will be reconsidered every quarter of the year, moreover, they will be determined not by a separate contract, but on the base of world exchanges indexes,” Dmitry Abzalov, analyst at the Center for Current Politics, explains. “Practically, it means that both Ukraine and Belarus won’t be able to require any favourable conditions in return of nothing. Moreover, Europe won’t support them any more.”

According to the politologist, Russia will now bargain for favourable term of energy delivering. “Baltic countries may be demanded to preserve the rights of Russian speaking minorities, what concerns Belarus, Russia may demand to allow its investors to the economy of the country, problems of Black Sea fleet and Ukraine’s joining NATO may also be solved by this means,” the politologist says.

According to the politologist, Gazprom has chosen a good time for prices increase. “It is a strong step, as Russia may increase the prices on legitimate terms against the background of price growth promised by Central Asian countries, “ Abzalov explains. “It will bring considerable politician and economical dividends to Russia.”

In the connection with energy price rise and lack of energy resources, Europe, in the expert’s view, will try to hasten development of gas transporting projects, first of all Nord Stream and South Stream, which naturally lays in the interest of Gazprom. “Economic and social factors are more important than political ones, and the European Union will have to bargain with Russia, which, by the way, can gain other preferences besides the green light for its projects,” the politologist concludes.