Belarus threatens retaliation over strong arm tactics by Gazprom

Deliveries of Russian natural gas to Europe could be severely disrupted this winter after Belarus, a key transit country, threatened to choke off Moscow's exports if its own supplies of Russian gas are cut off. Russia's gas exports to Europe were squeezed last year when the state-controlled Gazprom switched off neighbouring Ukraine in a pricing row that prompted some European politicians to question Russia's reliability as an energy supplier.

At the time Russia was accused of using its huge energy resources to bully a country seen as pursuing an anti-Russian course. But this year it is Belarus, usually a Kremlin ally, that is locked in an increasingly rancorous pricing dispute with Gazprom that could lead to similar supply shortfalls across Europe.

Russia sends around one-fifth of its European gas exports via Belarus on to countries such as Poland, Germany, and Lithuania and any prolonged dispute between Moscow and Minsk could pinch supplies to the West.

Problems surfaced after Gazprom demanded that Belarus begin moving towards "market" prices for Russian gas and away from its heavily subsidised rate of $47 (£24) per 1,000 cubic metres, the lowest rate granted to any customer outside Russia's borders and the same price charged to Russian domestic customers. Gazprom said Belarus should pay $105 per 1,000 cubic metres next year, well below European market rates of around $230.

Under Gazprom's proposals, the Kremlin would increase its strategic influence in the region by accumulating a 50 per cent stake in Belarus' pipeline network over four years since part of the payment would be in shares not cash. But Belarus, a country often known as "Europe's last dictatorship" because of its hardline Soviet-style government, has refused to acquiesce and is now facing the prospect of having its supplies of Russian gas switched off on 1 January unless a compromise can be found.

Minsk insists it cannot afford such a steep increase, saying sharp price rises would be "catastrophic" for its state-run centrally planned economy, and argues that Moscow should buy a stake in its pipeline network in cash rather than as part of a barter deal. Vladimir Semashko, the Deputy Prime Minister, has made it clear that Belarus will hamper Gazprom's European gas exports if it finds itself without Russian gas.

"We [Belarus and Russia] are mutually dependant," he said. "If I don't have a domestic gas supply contract, Gazprom won't have a transit deal." In turn Gazprom has let it be known that it has stockpiled emergency gas supplies in Germany and Austria to insure itself against blackmail.

Ironically, the two countries are supposed to be merging into one over-arching "Union" government with the same currency and a shared parliament.