Business of Gazprom in Belarus

2011: Complete redemption of Beltransgaz

On November 25, 2011 it became known that Russia and Belarus signed the delivery contract of the Russian gas to the republic and its transit through the territory of Belarus for 2012-2014. The document was signed the head of JSC Gazprom and JSC Beltransgaz in the presence of Russian Presidents and Republic of Belarus Dmitry Medvedev and Alexander Lukashenko^[1].

Under the terms of the contract, Russian gas supplies to Belarus in 2012 will make 22.5 billion cubic meters, in 2013 and 2014 - on 23 billion cubic meters.

At the same time JSC Gazprom brought the share in JSC Beltransgaz to 100% from already available 50%: the main transit pipe in the EU — Yamal — Europe — and so belonged to the Russian concern (he constructed it), now other gas pipelines to the western border, gas distribution networks and also internal consumers of Belarus also were added to it. The parties agreed that the concern purchases this packet for 2.5 billion dollars - for the same amount, as the first share block of the Belarusian company. The transaction is tied to signing of the new gas contract between the Russian Federation and Belarus.

The government of Belarus long promised to sell to Gazprom a pipe, however tightened with the transaction. Sale remained 50 percent of shares of Beltransgaz took place against the background of the strongest economic crisis which forced Minsk will ask for financial aid Russia and to announce sale of large public industries.

Earlier the prime minister of the Russian Federation Vladimir Putin said that these arrangements will settle the relations with Belarus in the gas sphere "for the years ahead" and will allow to provide uninterrupted transit of the Russian fuel across the territory of the republic.

The price for Belarus for the Russian gas in the I quarter 2012 will be 164 dollars for 1 thousand CBM, and the annual average price of the Russian gas for the republic in 2012 will be 165.6 dollars for 1 thousand CBM. In 2011 the annual average price was 244 dollars for 1 thousand CBM, thus that the official price on gas for Belarus - 286 dollars.

Besides, the Russian Federation and Belarus agreed about debt restructuring for the Russian gas which was formed because of payment of gas by Minsk at cut price. Also the Russian Federation and Belarus agreed that Belarus will come for payment of the Russian gas at the so-called equal profit price by 2014.

Many criticized Lukashenko. But he found what to answer. "It is the normal, normal transaction for our state. I tell it in reply to those who say that we lost the lever of impact on Russia. I ask: you what, with Russia were going to be at war?" Sovereignty of Belarus did not suffer, he added: physically the pipe remained in the territory of the country. Plus is a discount for gas and the guaranteed transit now. Risk to lose this guarantee existed: in November Russia started the first gas pipeline Nord Stream with an exit to Germany, Lukashenko, in line — the second thread reminded, and "I think, they [Russians] implement these plans"^[2].

And in 2007 the Belarusian president called Nord Stream "the most foolish project" in the history of Russia which will be included into the Guinness Book of Records: "All — both from the North, and from the South — do not perceive this gas pipeline".

Influence of the transaction on a position of Ukraine

The spirit and in Ukraine changed: with a view to it "the Belarusian performance" was played, the staff of Gazprom does not hide. Earlier Kiev held the gas transmission system (GTS) — much more powerful, than Belarusian. But start of Nord Stream, a discount for Belarus and also promises of Gazprom to reduce transit across Ukraine after start of one more project — South Stream through the Black Sea — made the case. "We were outdone" — the president of Ukraine Victor Yanukovych recognized in the end of the year: construction of bypass gas pipelines began when Ukraine "began to move with muscles, to dictate the terms instead of agreeing". As a result two Gazprom "flows" will depreciate the Ukrainian GTS, the president added: "Instead of noise which was that [GTS] is our wealth we will receive scrap metal". At the same time the country continues to pay the "discriminatory" price for Russian gas.

The Belarusian example not just cut Ukraine to the quick — it gave to Yanukovych the chance to show to own electorate: there is nothing terrible in the transaction with Russia, the official of one of the Russian departments argues.

The transaction price for Gazprom

How many cost such success to Gazprom, to count quite difficult: it is not known that it would spend anyway and what could do without. But if to assume that all expenditure are the price of "game" with the former neighbors in the USSR, then it is approximately about $41-42 billion. From them at least $30 billion are costs and losses of Gazprom (without partners).

The first part of total amount — about $30 billion — the cost of all system Nord Stream: about $16 billion — the price of the Russian gas pipelines under this system, Pochinki — Gryazovets and Gryazovets — Vyborg (if to put investment programs of Gazprom for 2006-2012 and to recalculate at average rates every year), about $14 billion more — Nord Stream and NEL and OPAL gas pipelines in the territory of Germany (just in these projects Gazprom shared expenses with partners).

The second part — $11-12 billion — actually expenses and losses of the Russian concern in Belarus: $5 billion for 100% of Beltransgaz spent in 2007-2011 and also $6-7 billion the half-received profit on discounts on gas in the next three years. In 2012 the price for Belarus will be $165.6 for 1000 CBM (according to Lukashenko, at a formula from the old contract $330-380 would turn out). And in 2013-2014 the cost of raw materials will be tied to rates of the FST for the Yamalo-Nenets Autonomous Area, but not to the European prices of Gazprom as earlier.

About $30 billion more can leave on South Stream — also taking into account the Russian system. Plus the day before yesterday the chairman of the board of Gazprom Alexey Miller said that in the coming months the concern will begin preparation of the feasibility study for the third and fourth branches of Nord Stream — they will double the total power of the gas pipeline.

Unfortunately, South Stream all the same should be built sooner or later, the Russian official notes: even if Moscow will sign the agreement with Kiev and will receive a share in local GTS, there are no guarantees that Ukraine will not change the mind then — not because "they bad, it is simple we already have an experience". A question only how to check expenses of Gazprom, the employee of the White House adds: buildings in Russia in which he is engaged itself are always more expensive, than those that are implemented with the European partners. But it is already single question — not this year, he makes a reservation.

2012: Transfer of calculations to currency

Since January, 2012 the Belarusian areas are calculated with Beltransgaz which for 100 percent belongs to Gazprom, for the fuel delivered from Russia in currency. About it as RIA Novosti reports, the CEO of the Belarusian enterprise Vladimir Mayorov said^[1].

The head of the company specified that such practice removes from Beltransgaz currency risks as from now on for calculations with Russia the regional enterprises are engaged in purchase of currency. According to Mayorov, the regional companies pay in currency only at cost of the Russian gas. Beltransgaz levies a margin in Belarusian rubles.

The chairman of the board of Belgazprombank Victor Babariko said on March 23, 2012 that the financial organization is ready to grant to regions the loans for total amount of 300 million dollars for payment for gas. Belgazprombank is founded in 1990, his major shareholders are Gazprom and Gazprombank, each of which owns a share in the amount of 49.02 percent of shares.

In 2012 the average cost of the Russian gas for Belarus will be 165.6 dollars for one thousand cubic meters.

At the end of February, 2012 Belstat reported that in 2011 Belarus bought fuel on average in 265 dollars for one thousand cubic meters that is 41.5 percent more, than the previous year.

In February, 2012 the first Deputy Prime Minister of Belarus Vladimir Semashko recognized that without discount for gas economic country situation seriously would worsen. "If we did not sign the agreement in a packet, then we would have a price of gas of more than 300 dollars today. We would have an accident, collapse is even worse, than last year", - the official said.

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