Russia and Belarus reach gas deal

Russia and Belarus announced a last-ditch deal on gas prices, minutes before Moscow was to start cutting off supplies with potential knock-on disruption for customers in Europe.

At a joint news conference last night, Alexei Miller, CEO of Russian gas monopoly Gazprom, and the Belarus Prime Minister, Sergei Sidorsky, said Russian gas exports to Europe via Belarus were out of danger after a deal was agreed.

Under the accord, Belarus agreed to pay Gazprom $100 (£51) per 1,000 cubic metres of natural gas, up from the $46 Belarus has been paying until now.

Since Belarus is a key transit country for Russian gas to Europe ­ 20 per cent of Moscow's gas exports flow through its pipelines ­ there were fears that a dispute between the two countries could have cut European supplies. With the clock ticking towards midnight and no deal in sight, Gazprom, Russia's state-controlled energy giant, was preparing to turn off the gas taps to Belarus this morning.

The Russian company had been demanding a 125 per cent price increase for its gas including a 50 per cent share in Belarus's pipeline operator ­ painful changes it says are necessary to wean Belarus off Soviet-era Kremlin subsidies.

But Belarus's hard-line president, Aleksander Lukashenko, had accused his erstwhile allies of blackmail amid suggestions his regime may be badly weakened if cheap Russian gas dries up.

Last night Belarus's First Deputy Prime Minister, Vladimir Semashko, was hunkered down at Gazprom's headquarters hammering out the five-year gas supply agreement.

Failure to agree a contract for 2007 would have left Belarus's 10 million inhabitants in the cold and damaged relations between two countries that have been allies since the collapse of the Soviet Union. If such a crisis dragged on, it would have been only a matter of time before European countries that buy Russian gas via Belarus felt the pinch.

Moscow sends one-fifth of gas exports through Belarus in Russia's Yamal-Europe pipeline. That gas is earmarked for Germany, Poland and Lithuania.

The row revived memories of a similar dispute with Ukraine a year ago which disrupted Russian deliveries to Europe and shook confidence in Russia's reliability as a supplier.

In the past 12 months, Russia has agreed hefty price rises with the ex-Soviet republics of Ukraine, Georgia, Armenia and Moldova.