Russia-Belarus gas crisis in late 2006 allowed Gazprom head Alexei Miller (R) to implement plans for creating a joint venture with Beltransgaz.
Photo: Dmitry Azarov
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Nothing Ventured, Nothing Gained
// Gazprom signed the agreement to purchase part of Beltransgaz
Gazprom has at last signed the contract for acquiring 50 percent of Beltransgaz shares. Thus, the monopoly gained access to control over the main pipelines thru which one fourth of Russia’s natural gas is exported. The contact is the fruit of 13-year-long complicated negotiations. Gazprom decided to maximally hedge itself, stipulating that disputes be solved in a foreign arbitration court. Due to this condition, signing the contract nearly fell thru on Friday. Yet, experts believe that Belarus authorities still have the levers of pressure on the Russian monopoly.
Gazprom signed the contract for buying Beltransgaz shares with Belarus on Friday night. Beltransgaz owns the main pipelines thru which Russia’s natural gas is supplied to Poland and Germany. Belarusian Deputy Prime Minister Vladimir Semashko said that Gazprom will pay $625 million within 20 days, after which 12.5 percent of Beltransgaz shares will be transferred to Gazprom. The remaining 37.5 percent will be bought out at equal parts in 2008-2010. The deal will be worth $2.5 billion in total. Gazprom’s press service said the wholesale extra charge on gas for Belarusian consumers will be raised gradually. Belarus also promised not to introduce golden share at Beltransgaz.
The agreement on selling half of Beltransgaz to Gazprom was reached during the New Year conflict between the two countries concerning gas supplies to Belarus. However, the countries were unable to finalize the corresponding contract for a long time. It seemed on Friday the contract would not be signed this time either. Gazprom head Alexei Miller’s visit to Minsk was cancelled several hours before his flight, as well as the scheduled press conference. “Signing the package of documents for creating a joint gas-transporting organization on the basis of Beltransgaz is postponed to a later date due to the necessity to additionally finalize a sub-paragraph of the purchase-and-sale agreement for Gazprom’s buying Beltransgaz shares,” the Belarusian government said on Friday afternoon. Gazprom did not disprove their partners’ pessimistic statement either. It said the deadline for creating the joint venture expires on June 1. “It is already a tradition that we finalize last details with our Belarusian partners on the 31st day of month,” said Sergei Kupriyanov, deputy director of Gazprom’s information policy department. He meant the protocol on supplying Russian gas signed by Alexei Miller and Belarusian Prime Minister Sergei Sidorsky just a couple of minutes before December 31st, 2006.
Gazprom has been trying to acquire control over Beltransgaz since long ago. Back in 1994, Russia’s then Prime Minister Viktor Chernomyrdin offered to Belarus’ newly-elected president Alexander Lukashenka to privatize and sell Beltransgaz to Gazprom. By the way, Chernomyrdin’s overt support helped Lukashenka to overcome his rival Vyacheslav Kebich at the presidential election that year. Two years later, Chernomyrdin came to Minsk to reconcile the president of Belarus and the parliament which was in opposition to him. They were reconciled, the parliament was dissolved, but Beltransgaz was not privatized.
Even when Russian President Vladimir Putin in 2002 put his signature next to Alexander Lukashenka’s signature on the package of documents for creating a JV on the basis of Beltransgaz before July 1st, 2003, nothing changed. So, it seemed on Friday that Belarusian authorities have found one more way to procrastinate the creation of the JV. A source in Gazprom said the parties could not reach agreement on which country’s law should be used for solving disputes. “Belarus insisted on solving disputes according to Belarusian laws, because Beltransgaz is on that country’s territory and the JV would be registered there as well. Yet, Russia was against it, and suggested going along Russian laws. After numerous negotiations, Gazprom suggested on Friday morning that disputes should be solved under international jurisdiction, in arbitrary courts. Belarus did not mind in general, but asked for time to alter documents,” said the source. Another source in Gazprom confirmed this information.
Gazprom’s Deputy Chairman Valery Golubev set off for Minsk urgently, commissioned to sign all necessary documents. The Belarusian party held council for half of the day. Then, they quickly altered all necessary documents. By 7:10 p.m. Moscow time, the purchase-and-sale contract was signed, along with a supplement to the ‘New Year’ protocol. Independent lawyers say that turning to international courts means the parties do not trust each other completely. “By choosing the law of a third party, Russia and Belarus hedge themselves against mutual apprehensions that the laws of either country might contain hidden loopholes known to one of the shareholders, so as to avoid complications unforeseen by the contract,” explained Maxim Chernigovsky, director of the analytical department at Vegas-Lex CIS law firm. “There are universally acknowledged uncorrupted arbitrary courts in Stockholm, Geneva, London, two -- in the Netherlands.” Linia Prava company’s managing partner Andrei Novakovsky said that 12.5 percent of shares do not give the right to control an enterprise, but only allow to receive information about its functioning, and do not allow to influence management decisions. “With any changes in the law making it impossible to implement the contract, or making this implementation not interesting for Gazprom, the contact may be dissolved,” the lawyer said. “For instance, in case of default for which the Belarusian government is responsible, or in case of concluding deals unprofitable for the Russian monopoly.”
However, experts are sure that Belarusian authorities still have some levers of influence on their agreements with Gazprom. Moreover, Belarus might use Russia’s own experience for it. “Alexander Lukashenka still has ‘the Mitvol move’, or ‘the Sakhalin method’, for restraining prices on Russian gas,” said Mikhail Korchemkin of East European Gas Analysis. “Since the Yamal-Europe gas pipeline was built less than four years ago, and there may be easily discovered the violations of nature-protection and construction laws, the multi-billion fines can be settled by nationalizing the pipeline’s sector owned by Belarus.” Korchemkin added that this threat will affect Gazprom’s position in case of new conflicts around Beltransgaz.
Natalia Grib
All the Article in Russian as of May 21, 2007
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