New formula for gas price

The gas price discussion between Minsk and Moscow that has been ongoing since the beginning of the year is likely to soon come to an end
The gas price discussion between Minsk and Moscow that has been ongoing since the beginning of the year is likely to soon come to an end. According to Kommersant newspaper (which refers to the sources familiar with the negotiation process), the two sides have approved a new scheme for the formation of the gas price. The fuel price for Belarus will fall by almost a third and we’ll be paying for blue fuel in Russian Roubles rather than US Dollars. During his recent working meeting with Deputy Prime Minister of Belarus, Vladimir Semashko, the President of Belarus, Alexander Lukashenko, set the goal that the final agreement with the Russian side on the supplies of energy resources must be secured within the shortest possible time.

The essence of the new gas formula is that price for Belarus will be determined on the basis of the average gas price in Russia, multiplied by the multiplying coefficient. For 2017 the average price will amount to around 4,05 thousand Russian Roubles for one cubic metre while the multiplying coefficient will be 1.48. Thus, next year, gas for our country will cost around 6,000 Russian Roubles for one cubic metre (around $92 instead of the current $122).

The two sides also agreed to gradually reduce the multiplying coefficient and, by 2025, when a single energy market should become operational, it should be brought to 1. In other words, by that time Belarus will be paying for gas using on average the same price as Russian consumers. The transfer to Russian Roubles payments will reduce risks, arising because of fluctuations in the currency exchange rate.

It’s well known that the energy dispute between Belarus and Russia originated because of the fall in world oil prices and significant alteration of the US Dollar exchange rate towards the Russian Rouble. In this respect, Minsk insisted on the reduction in price of the gas supplies. Recently, Belarus’ Prime Minister, Andrei Kobyakov, declared that the negotiations are close to completion, “In July, our GDP slightly reduced by 0.2 percent. However, this is connected with the restriction of oil supplies to oil refineries, reduction of industrial production and reduction of wholesale trade in oil products. We hope that this is a temporary thing. We’re close to reaching an understanding with our Russian partners regarding the gas prices and supply volumes to Belarus.”

By Yevgeny Kononovich

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