Belarus Pays off Gazprom Debt 'in Full'

Belarus has repaid in full the $726.2mn owed to Gazprom for Russian gas supplies in 2016-2017, Gazprom said April 13.

Since early 2016 Belarusian consumers have been underpaying the country’s gas grid, Gazprom Transgaz Belarus, for Russian gas – in an effort to secure a repricing of their gas towards levels in western Europe, which have fallen significantly, rather than the contractual formula - and in response, Russia had reduced oil supplies to Belarus.

However, on April 3, following the meeting of the Presidents of Russia and Belarus, it was announced that the oil and gas dispute, which has lasted more than a year, had been settled. Under the agreement, Belarus will repay the debt to Gazprom amounting to more than $700mn, and Russia in response will increase duty-free oil supplies from 18 to 24 million tons annually and will provide a discount on gas, starting in 2018. At the same time, Belarus and Russia, by January 1, 2018, will develop the rules for a single gas market.

Gazprom's statement said of the agreement: "The protocol defines the pricing procedure for 2018–2019. Pursuant to the document, the pricing will be based on a price formula linked to the price of gas in the Yamal-Nenets Autonomous Area. [In] 2017, gas will be supplied under the existing contract."

It's believed that means, although Belarus will get a discount from the formula price, it will not be paying less than current prices by 2018 even under the new gas-indexed formula, and probably not a price fully in line with western Europe.

Where did Minsk get the money to repay the debt, anyway? Dmitry Balkunets, an expert at the National Research University's Higher School of Economics of Moscow University, believes that extending credit from Russia allowed Belarus to pay back the debt owed to Gazprom. In his opinion, Belarus managed to repay this debt using Russian funds: “The fact is that today the Belarusian economy is in a very difficult situation and, without external Russian assistance, it would have been extremely difficult to do this; therefore Russia has made such concessions."

Azerbaijan desk