Gas Supplies

"We are inter-dependent," Belarus's Deputy Prime Minister Vladimir Semashko said at Minsk airport late Tuesday after returning home from fruitless gas negotiations in Moscow. "If I don't have a domestic gas supply contract, Gazprom won't have a transit deal."

Gazprom acknowledged that its latest round of negotiations with Belarus on a steep price increase failed, but said Europe was safe due to gas reserves in Germany and Austria to guard against possible cuts.

"Unfortunately, negotiations in fact ended without a result," Gazprom spokesman Sergei Kupriyanov said on Russian state television, Vesti 24.

Gazprom has threatened to reduce deliveries to Belarus on January 1 if the ex-Soviet republic refuses to pay higher prices from 2007 and share control of its pipelines with the Russian firm.

However, Kupriyanov assured that western European clients would not be affected by the row, which is similar to a crisis between Gazprom and Ukraine at the start of 2006.

Then, Gazprom temporarily cut off supplies to Ukraine, which produced gas shortages in Europe in the dead of winter.

Gazprom, the world's largest gas producer, supplies a quarter of Europe's gas needs. The cut-off to Ukraine prompted European leaders to raise concerns over reliance on Russia.

About 80 percent of the Russian gas piped to Europe transits through Ukraine and about 20 percent through Belarus.

Gas in European storage

A Russian gas industry source told Reuters news agency that Gazprom had stored much more gas than in Germany and Austria as compared to last year and could cover contracts in Europe for several weeks if needed.

The industry source said extra gas had been pumped into Rheden, the biggest storage facility in Germany, belonging to Wingas, a joint venture of Gazprom and Germany's petrochemical giant BASF. Extra gas has also apparently been stored in its Haidach storage facility in Austria.

Kupriyanov has confirmed extra European gas reserves: "There are no grounds for concern among European consumers," he told state television Vesti 24.

Agreement still possible

A Belarussian energy ministry official who wished to remain anonymous told Russian news agency Interfax that he still hoped for an accord with Gazprom. "We continue to formulate our position, and we hope for a softening of Gazprom's position," the official said.

He described threats by Gazprom that Belarus could face a cut-off as "rather brusque."

Belarus currently pays Gazprom $46.68 per 1,000 cubic meters (35,315 cubic feet) of gas.

Gazprom has said it wants to charge around $200, unless Belarus agrees to sell 50 percent of its pipeline operator Beltransgaz, giving the Russian state-owned giant an important strategic foothold on the European Union's eastern border.

Earlier on Tuesday, Gazprom said it was prepared to scale back and charge only $110 dollars per 1,000 cubic meters.

Kupriyanov said that by comparison, Ukraine would pay $130 for gas in 2007. European consumers pay over $250.