Gazprom Getting Tough With Ex-Soviet Republics

Moscow Times
June 16 2004

Gazprom Getting Tough With Ex-Soviet Republics

Combined Reports

Dmitry Beliakov / bloomberg

Ryazanov said Gazprom will gradually raise gas prices for all three
Baltic states.

Gazprom, the world’s largest natural gas producer, said Tuesday it
plans to cut deliveries of the fuel to former Soviet republics by
almost 5 percent this year and gradually raise prices for new
European Union members Lithuania, Latvia and Estonia.

“We shall start pushing prices up for [the Baltic states] to the
level close to the European Union,” Gazprom deputy CEO Alexander
Ryazanov told a news conference.

He said that Gazprom, which rarely discloses export prices, supplies
the Baltic states at $84 per 1,000 cubic meters. Neighboring Poland
gets gas at about $120 per 1,000 cubic meters.

Gazprom will deliver 49.9 billion cubic meters of gas to the CIS,
Georgia and the Baltics, down from 52.3 bcm last year, he said.
Deliveries to Belarus will rise by 2 percent to 18.5 bcm, and to
Lithuania by 4 percent, to 3.07 bcm.

“There are serious problems in developing cooperation between Gazprom
and the CIS countries because of debts they owe for gas,” Ryazanov

Gazprom says Ukraine, Belarus and Moldova owe $3.25 billion. At the
start of June, the company stopped deliveries to Poland and Germany
through Belarus after a price dispute.

Ryazanov warned that Gazprom might limit deliveries to Georgia, which
has accumulated a $50 million to $60 million debt.

“Georgia is our main headache,” he said.

Production will rise 3.3 percent to 542 bcm, with 291 bcm going to
Russia, he said. It expects to break even on domestic sales and earn
as much as $400 million from them in 2005.

“This is a transitional period, and we’ll look at prices when we get
over this period,” Ryazanov said.

Gazprom will increase transit shipments of gas from Azerbaijan,
Armenia, Georgia and Moldova as much as sixfold to 9.35 bcm this
year, he said. A total of 44.1 bcm from Central Asia will cross
Russian territory, along with 119.2 bcm from Ukraine, 33.1 bcm from
Belarus and 22.1 bcm from Moldova.

“The main problem in delivering Central Asian gas is the lack of a
decent transport infrastructure,” Ryazanov said.

He said Moldova owes Gazprom $1.26 billion, and the company is in
talks with the government on restructuring the debt, including
schemes under which Gazprom will get shares in Moldovan firms.

(Bloomberg, Reuters)