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Belarus settles bill with Russian energy giant

By the CNN Wire Staff
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STORY HIGHLIGHTS
  • Belarus says it has paid natural gas debt in full
  • Russia and former Soviet republic trade accusations of unpaid bills
  • Dispute could affect energy supplies to Europe
  • Gazprom is one of Russia's most powerful companies
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  • Belarus
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Moscow, Russia (CNN) -- Belarus has paid its natural gas debt to Russian energy giant Gazprom in full, a top Belarus government official said Wednesday, in the latest twist of a dispute that could affect Europe's energy supplies.

Belarus "wired to Gazprom $187 million and therefore fully cleared its debt for the Russian gas deliveries," Belarus senior deputy prime minister Vladimir Semashko said, the government press office confirmed.

The two sides have been trading accusations of unpaid debts since Monday. Gazprom says Belarus owes $192 million, while Belarus President Alexander Lukashenko says Gazprom owes $260 million.

Earlier Wednesday, Gazprom reduced the amount of natural gas it supplies to Belarus for the third time this week, after it said Belarus paid some but not all of its bills.

The former Soviet republic paid for gas received in May, but not for supplies delivered earlier in the year, so Gazprom cut gas delivery by a total of 60 percent, the company said.

Belarus threatened to cut gas delivery to Europe to make up for the losses it was suffering, but European gas supplies have not been affected, Gazprom said. Europe gets 6.25 percent of its natural gas imports from Russia via Belarus.

Meanwhile, Lukashenko ordered the halt of Russian natural gas deliveries to Europe via his country, his office told CNN Tuesday. Belarus says Gazprom owes it money for transporting Russian gas to Europe.

"They haven't paid us a penny for this in the past six months," Lukashenko said, according to the state-run news agency Belta.

He called it "cynical and absurd" for Gazprom to cut its supplies to Belarus "when you owe me $260 million, while I owe you $190 million," Lukashenko said.

Gazprom admits that it owes Belarus for its gas transit to Europe, but says Belarus is mixing two different contractual issues -- domestic supply and international transit -- that should not be combined.

Gazprom has not paid the transit fees so far because the two sides have not completed the proper paperwork, the company said in a statement Wednesday.

Russia exports approximately 20 percent of its gas to Europe through Belarus, Gazprom says. The other 80 percent transits through Ukraine.

Disputes between Russia and Ukraine over gas last year left many Europeans shivering during a bitterly cold winter.

Officials from the European Commission are in close contact with Russian and Belarus authorities over the dispute and expect "that the gas flows to the European Union will not be affected," spokeswoman Marlene Holzner told reporters Tuesday.

Gazprom CEO Alexei Miller has said the cuts in the amount of gas sent to Belarus will continue daily and be "proportional to the volume of debt."

Belarus has refused to pay Russian gas rates of $169 per 1,000 cubic meters for the first quarter of the year and $185 for the second quarter, the official Russian news agency RIA-Novosti reported.

The former Soviet republic has instead been paying $150 since January 1, ringing up a large debt in the process.

In the past, other countries including Austria, Bulgaria, the Czech Republic, Germany, Romania, Greece and Turkey have complained that their gas supplies have been affected as Russia trimmed output to upstream customers like Belarus and Ukraine.

Gazprom is the world's biggest producer and exporter of natural gas -- and Russia's most powerful company.

It controls 20 percent of the world's natural gas reserves and operates the world's largest gas distribution network, covering an area from Europe to the Far East, according to its website.

Gazprom exports energy to 32 countries and provides around 25 percent of the European Union's gas supplies.

Formed in 1989 to replace the Soviet Ministry of the Gas Industry, Gazprom is closely tied to the Russian government, which owns a controlling 50 percent stake in the company. President Dmitry Medvedev is a former Gazprom chairman.

In recent years, an increasingly confident Moscow has used Gazprom to assert its authority over Russia's former sphere of influence by offering heavily subsidized gas to ex-Soviet countries.

But that policy has led to disputes as Gazprom has then sought to raise prices.

Gazprom has switched off gas supplies to Ukraine -- another former Soviet republic -- several times in recent years in a row over payments and Kiev's rejection of proposals to hike rates.

Those disputes ended earlier this year when Russia agreed to a 30 percent drop in the price of natural gas sold to Ukraine, in exchange for permission to extend Russia's lease of a major naval base in the Black Sea port of Sevastopol, Ukraine, for 25 years.

CNN's Maxim Tkachenko and Matthew Chance contributed to this report.