Meeting with Cabinet Members.Part 1
January 9, 2007
The Kremlin, Moscow
Совещание с членами Правительства
9 января 2007 года
Москва, Кремль
PRESIDENT VLADIMIR PUTIN: I suggest that we talk about energy issues and, of course, first and foremost the ones that affect our relations with our closest neighbours, with our partners. I am also referring to the unresolved issues in our negotiations with Belarus.
How is the agreement we signed on the deliveries and transport of Russian gas functioning in practice? Could Viktor Borisovich [Khristenko] comment? Please go ahead.
INDUSTRY AND ENERGY MINISTRY VIKTOR KHRISTENKO: Concerning the gas agreements, the package that was signed has come into force and is being executed in its entirety. This concerns both the deliveries of gas for the Belarusian economy as well as transporting Russian gas through Belarusian territory to European consumers. In this respect, the agreements that were signed regarding deliveries to the Republic of Belarus provide for a four-year transition period while the Belarusian economy and population gradually adapt to the new energy prices, to the new price regime, to the gradual transition to market prices and to the transfer of part of the Beltransgaz property rights which represents a partial compensation of the increase in gas prices.
In connection with this I would like to once again emphasise that to a large degree the decisions made concerning Belarus reflect the internal decisions that Russia made 30 November 2006 on the formation of a gas market. We already reported on this to you. First and foremost these decisions are based on the necessity of ensuring energy security in Russia in the medium- to long-term, on avoiding the excessive monopolisation of the energy market, on reaching new levels of extraction, on exploiting new deposits (undoubtedly, the cost and expenses of extraction are higher in these new deposits than in old ones), and on launching mechanisms to ensure efficient energy use. The cabinet made decisions calculated on this four-year term, during which prices on the Russian gas market will gradually become equal to those on the European market. However, it is certainly true that regardless of all this even by 2011 internal Russian prices, those within the Russian Federation, will remain substantially lower than the prices of gas delivered to any other consumers.
I would like to emphasise that this four-year transition period is also linked with the process of gradually adapting Russias economy to the new prices and is taking into account the growth of population incomes while delivering gas to the population.
Coming back to Belarus, it is necessary to say that from the beginning, the original position was connected with a three-year transition period to new gas prices. However, the Russian party eventually acknowledged that the Belarusian economys period of adaptation should be equal, identical to that of Russia itself and also be four years long.
VLADIMIR PUTIN: Let us recall the price. The price is 100 dollars per 1000 cubic metres, as far as I know?
VIKTOR KHRISTENKO: Yes.
VLADIMIR PUTIN: Poland buys from us for 270 dollars per 1000 cubic metres. This means that this year the market price for Belarus would be about 260 dollars per 1000 cubic metres. The Russian Federation agreed that this year it would sell Belarus gas for 100 dollars, therefore below market price. This is the lowest price in the CIS. Even a country such as Armenia, a country that also has quite a few problems, pays 110 dollars per 1000 cubic metres of gas. And let us not forget that Russia is not collecting export duties while exporting our gas to Belarus.
As a whole, if we look at the difference between market price and the price that we agreed on today with the Belarusian party then the difference for Russia amounts to approximately 3,300 million USD. Out of this Russian budget loses about 1,300 million USD due to the export duties it does not collect, and Gazprom loses about two billion. And these losses of billions of dollars - even taking into account the downward trend - will be conserved during the whole transition period, during four years. This is the price Russia must pay to change to market relations. And this represents direct support for our Belarusian colleagues and a cost for Russia and Russian taxpayers measured in many billions of dollars.
With regards to Beltransgaz, Gazprom really does have 50 percent holding in that company but it remains only a minority shareholder because it does not have a controlling stake nor input into how the company is managed. Along with this we agreed that we will accept the highest evaluation made by an independent evaluator five billion dollars. And we are paying the Belarusian party 2,5 billion dollars. As a matter of fact, that 2,5 billion represents one more form of support for our Belarusian colleagues.
Duration : 0:9:55
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