Belarus 'to pay for Russian gas debt' within two weeks

Belarus has said it will settle its gas debts to Russia within two weeks, after its eastern neighbour started cutting supplies in a dispute over payments.

Deputy Prime Minister Uladzimir Syamashka said Belarus would borrow the nearly $200m (£135m) demanded by the state-controlled gas monopoly, Gazprom.

But he added that Russia owed Belarus $217m (£146m) in fees for transiting gas via its territory to Europe.

Earlier, Russia's president ordered Gazprom to reduce supplies by 15%.

Dmitry Medvedev said this would rise "day-by-day" to 85% if Belarus did not start paying off its debts, accrued when it failed to pay increased prices.

Belarus believes the higher price it is being charged contradicts a customs union deal agreed between the two countries.

The row threatens to disrupt onward deliveries to Europe as about a fifth of its supplies of Russian gas is pumped through Belarus.

In 2009, a similar dispute between Russia and Ukraine saw Gazprom shut off supplies in the middle of winter, affecting millions of people

Announcing that it had started to cut supplies on Monday, Gazprom chief executive Alexei Miller told Mr Medvedev that Belarus had proposed to pay the debt "with machinery, equipment and various other products

Mr Medvedev said foreign payments could only be accepted in foreign currencies: "Gazprom cannot accept debt repayments in anything, be it pies, butter, cheese or other means of payment."

Later, Mr Syamashka told journalists that Belarus would pay within two weeks.

"We do not hide that we have problems with hard currency. Belarus has to resort to borrowing in order to make a payment on time," he said. "We will find a way - borrow money - but pay."

Mr Syamashka said a protocol would be signed at talks in Moscow on Monday "about which we will probably not agree in full, but it is important that Russia recognised the debt for the transit of Russian gas via Belarus is worth $217m".

"They will pay for transit. We will pay for gas," he added.

Belarus had previously insisted that Russia provide it with cheap oil and gas as part of a customs union deal between the two countries that is due to come into force next month.

Russia increased the price of gas supplied to Belarus from $150 per 1,000 cubic metres of gas last year, to $169.20 in the first quarter of 2010 and $184.80 in the second.

But Belarus has continued to pay at $150. Gazprom said at that rate it could owe $500m or $600m by the end of the year.

Belarus is an important part of the pipeline network which transports Russian gas supplies to Europe.

It remains heavily dependent on Russia to meet its own energy needs, and a considerable proportion of Russian oil and gas exports to Europe pass through it.

Russia and Belarus are supposed to be close allies, but have had several rows in recent years, particularly over energy supplies, correspondents say.

Russia has not been afraid to cut supplies to countries it accuses of falling behind in their payments.

In January 2006 and again in 2009, Russia cut gas supplies to Ukraine, causing knock-on effects all over Europe.

In January this year, a row nearly resulted in Russian oil deliveries to Belarus being halted.

Russia's critics have accused it of using its energy supplies as a political weapon.