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. Last Updated: 07/27/2016

Russia Resumes Gas Supplies to Belarus

Russia resumed gas supplies to Belarus on Thursday after paying gas transit debts in an effort to ease fears of supply cuts to the European Union, which said it believed that the dispute was over.

EU members Poland and Lithuania, which saw a brief fall in deliveries on Wednesday, were getting full supplies Thursday.

"We regret that a conflict erupted," Prime Minister Vladimir Putin said after calling a meeting of top energy officials in the Siberian town of Novokuznetsk, in the first conciliatory comment after days of tension.

"We hope it won't be repeated. … We need to hold talks with our partners and solve all disputed issues in a normal, working, amicable atmosphere," he said.

Gazprom chief Alexei Miller said in televised remarks at the meeting that the company fully resumed gas deliveries.

Miller told Putin that overall transit shipments of Russian gas to the European Union nations fell by 20 percent Wednesday because Belarus siphoned gas intended for export.

But Belarus, which on Wednesday said it had paid its $187 million debt to Russia, demanded in return that Moscow pay what it claims is a $260 million bill for transit of gas. Belarus has threatened to cut off gas transit Thursday if Moscow does not pay up.

Gazprom spokesman Sergei Kupriyanov said at a briefing that the company had paid Belarus $228 million in transit fees, in line with the contract, but that Belarus was demanding a higher fee, which Gazprom rejects.

“We see no reasons at present for there to be problems with transit or supplies to residents in Belarus,” Kupriyanov told reporters in Moscow. “Questions remain about what the exact transit fee should be. We expect to resolve them.”

Belarus quickly responded by saying Russia must pay a higher price or face a proportionate cut in transit supplies.

Kupriyanov rejected the demand and said the company would not pay more. Putin backed that position, saying changes in transit fees should be subject to separate talks.

Russia, the world's largest energy exporter, supplies Europe with 25 percent of its gas needs, with four-fifths of that flowing via Ukraine and one-fifth via Belarus.

Russia also supplies 1 million barrels per day of oil to German and Polish refineries via Belarus, and flow remained unaffected so far.

Neither Moscow nor Minsk has explained why relatively low debt levels sparked the dispute. But analysts noted that the spat followed the souring of relations between the two neighbors after they failed to agree on unified customs rules.

Belarussian President Alexander Lukashenko also gave refuge to ousted Kyrgyz President Kurmanbek Bakiyev, despite Moscow's support for the new Kyrgyz leadership.

Energy markets have stayed largely unmoved so far — in contrast to a similar gas row between Russia and Ukraine in January 2009 when prices spiked on supply shortages, tarnishing Russia's image as a reliable producer and spurring a European quest for new suppliers.

"If this had happened in Q4 or Q1 and been in Ukraine, the market would have gone vertical. In Belarus, in June, there's a limited impact. It is discounted in the short-term. The volumes are small," said Jason Durden, energy trader at London-based EnergyQuote.

Tensions could still flare up as Gazprom and Belarus still disagree on the exact amount of debt to each other, future transit fees and gas prices.

Ukraine has promised to ship more Russian gas to Europe if Minsk transit cuts continue.

Gazprom's shares closed down 2.1 percent in Moscow, lagging the overall market. The MICEX Index of 30 shares ended 1.1 percent lower on Thursday.

(Reuters, AP, Bloomberg)