Last Update: 7:21 AM ET Dec 28, 2006
By Aude Lagorce, MarketWatch
LONDON (MarketWatch) — The European Commission on Thursday called for Russia and Belarus to find a rapid solution to a dispute over natural-gas prices that threatens damage to relationships between the two long-term allies and to disrupt deliveries to the continent.
“The Commission is following the situation very closely since it may affect gas supplies to the European Union. I call the two parts to reach as soon as possible a satisfactory agreement that do not put in question gas transits to the E.U.,” said Commissioner Andris Piebalgs in a statement.
The two countries are locked in a battle over gas prices that could see Russia’s state-run gas monopoly Gazprom turn off the taps to its neighbor if it doesn’t accept price hikes by January 1.
Sounds familiar? A similar dispute last January saw Gazprom (UK:GAZ: news, chart, profile) briefly cut off supplies to the Ukraine after the latter balked at price increases. The move disrupted deliveries to Gazprom clients in the European Union and reminded the global community of how vulnerable consumers are to a sudden break in energy supplies.
The fear of damaging its reputation as a supplier spurred Russia to restore the gas supply after three days but it still faced accusations of using its energy as a political weapon.
Well aware of Russia’s reluctance to tarnish its image further — particularly in the wake of the highly publicized poisoning of a former Russian spy in Britain last month — Belarus has warned that a suspension of supplies could jeopardize deliveries to countries in the E.U.
Russia provides roughly a quarter of Europe’s gas consumption. About 20% of the gas comes through pipelines in Belarus.
Gazprom shares were up 0.7% in London midday trading on Thursday.
Analysts for Deutsche Bank said the threat to Russia’s reputation as a supplier is significant.
“Despite the fact that Belarusian transit is smaller than that of the Ukraine, the damaged caused to Gazprom as a reliable gas supplier may theoretically be greater than the last time around,” they said.
The analysts also cautioned that it may be impossible for Gazprom to employ the same tactics it used with the Ukraine.
“The end result may be another blow to Gazprom’s status as a reliable gas supplier,” they concluded.
Gazprom stands its ground
Gazprom, which is demanding that Belarus pay more than twice the current price for gas next year and hand over a 50% stake in its gas-distribution system, has so far refused to back down. It argues that it’s been supplying gas to the former Soviet state at below market prices for too long and that the new price would remain far below that which E.U. countries pay.
Negotiations between the two countries collapsed on Tuesday and they have traded bitter words through the media since.
But there have been soothing words too. In an effort to reassure clients in the European Union, Gazprom Chief Executive Alexei Miller said in televised comments that the company has sent letters to Germany, Poland and Lithuania informing them about the developing situation.
Gazprom wants Belarus to pay $105 for each 1,000 cubic meters of gas — $75 in cash plus $30 in shares of the state-owned pipeline company, Beltransgaz.
Over time, such a deal could give Gazprom control of the Belarusian pipelines and shield it from the threat of disruptions to E.U. clients. Such an evolution would undercut Belarus’ bargaining power in future negotiations.
Last week Georgia agreed to pay $235 for 1,000 cubic meters of gas, more than twice the previous price of $110.
Kremlin points to former Yukos manager in ex-spy murder
Russia is in no mood to stand further damage to its reputation.
Its image suffered a blow last month when former Russian agent Alexander Litvinenko died of poisoning in Britain. On his death bed Litvinenko accused the Kremlin and Vladimir Putin of orchestrating his murder.
Russia has dismissed the accusations as “nonsense” and put forward various alternative theories. On Wednesday, the country’s prosecutor general said Leonid Nevzlin, former manager of the bankrupt Yukos oil giant, could have ordered the poisoning.
“A version is being looked at that those who ordered these crimes could be the same people who are on an international wanted list for serious and very serious crimes, one of whom is … Leonid Nevzlin,” the Prosecutor-General’s office said in a statement, Reuters reported.
Nevzlin, one of the senior-most figures in the business empire of jailed Russian oil tycoon Mikhail Khodorkovsky, says charges against him by the Russian authorities are fabricated.
Russia’s also tightening its grip on its energy assets. Earlier this month, it paid $7.45 billion in cash to wrest control of the Sakhalin-2 oil and gas project in Siberia from Royal Dutch Shell and Japanese partners.
The move concluded months of wrangling and heavy pressure from the Kremlin over control of the $22 billion project, which aims to build one of the world’s biggest liquefied natural-gas export terminals on Sakhalin Island — conveniently close to an eager Japanese energy market.
Aude Lagorce is a reporter for MarketWatch in London.
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Royal Dutch Shell conspired directly with Hitler, financed the Nazi Party, was anti-Semitic and sold out its own Dutch Jewish employees to the Nazis. Shell had a close relationship with the Nazis during and after the reign of Sir Henri Deterding, an ardent Nazi, and the founder and decades long leader of the Royal Dutch Shell Group. His burial ceremony, which had all the trappings of a state funeral, was held at his private estate in Mecklenburg, Germany. The spectacle (photographs below) included a funeral procession led by a horse drawn funeral hearse with senior Nazis officials and senior Royal Dutch Shell directors in attendance, Nazi salutes at the graveside, swastika banners on display and wreaths and personal tributes from Adolf Hitler and Reichsmarschall, Hermann Goring. Deterding was an honored associate and supporter of Hitler and a personal friend of Goring.
Deterding was the guest of Hitler during a four day summit meeting at Berchtesgaden. Sir Henri and Hitler both had ambitions on Russian oil fields. Only an honored personal guest would be rewarded with a private four day meeting at Hitler’s mountain top retreat.
IN JULY 2007, MR BILL CAMPBELL (ABOVE, A RETIRED GROUP AUDITOR OF SHELL INTERNATIONAL SENT AN EMAIL TO EVERY UK MP AND MEMBER OF THE HOUSE OF LORDS: 
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