Russia promises a discount on gas for Belarus

Putin said, “The decision to introduce a special reduced gas price calculation formula for Belarus in 2012 in the view of integration has been made”. He added that the price level will be determined via bilateral negotiations between economic entities.

Putin also said that final agreement will be linked to the acquisition by Gazprom of the remaining 50% of Beltransgaz.

Putin said, “The decision to introduce a special reduced gas price calculation formula for Belarus in 2012 in the view of integration has been made”.

Comment

The fact that Belarus will receive some preferential treatment in case of sale of the remaining shares of Beltransgaz was not doubted. The question is, how much the discount will be and what for. If in 2012 “Gazprom” sells gas to Belarus at Russian prices, its revenues will decline by USD 2.5-3 billion, which is hardly acceptable for Gazprom. Calculating a discount from the market price of USD 340, the expected market price for the next year will constitute USD 250-280 with 20-30% discount. Therefore, at least gas prices will stop growing and in the best case scenario will be less than the average price in 2011 (USD 180).

Earlier this year the shareholders of “Gazprom” agreed at the annual meeting that the supply to Belarus in 2012-2014 will not exceed 69 billion cubic meters of gas for a total maximum amount of USD 17.25 billion. Therefore the marginal value of 1 thousand cubic meters for Belarus is unlikely to exceed USD 250, which gives Belarus USD 7 billion in gas subsidy over the next three years.

Moreover, one should recall Putin’s words that “the integration ratio for energy supplies constitutes direct assistance and support, however is not a gift”.

Moreover, one should recall Putin’s words that “the integration ratio for energy supplies constitutes direct assistance and support, however is not a gift”.Rather, it is a package deal for the participation of Russian companies in the privatization of Belarusian assets and their more active role at the Belarusian market. Therefore Belarus is gradually dragged to the orbit of integration with Russia.