UPDATE 1-Belarus rekindles Russian gas spat

Fri Jun 25, 2010 5:24pm IST

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* Belarus leader says transit debt not fully solved

* Russia says owes nothing to Minsk

* Tensions flare up after EU said row was over

By Jessica Bachman and Andrei Makhovsky

MOSCOW, June 25 (Reuters) - Tensions over gas between Russia and Belarus flared up again on Friday with Minsk saying it could still halt Russian flows to Europe within 24 hours as it holds out for payment of a small debt which Moscow denies it owes.

The spat burst back into life just a day after Minsk fully resumed gas supplies to neighbouring EU members after a partial suspension on Wednesday in a gas pricing and fee dispute with Russia's gas export monopoly Gazprom (GAZP.MM).

"I am warning the government again -- if Gazprom doesn't pay for services in full in the next 24 hours it could lead to the suspension of all oil and gas transportation services for the Russian Federation," Interfax news agency quoted Belarussian President Alexander Lukashenko as saying.

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For Russia-Belarus map of gas pipelines in Europe here ^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^>

Gazprom said it did not understand what debt Lukashenko was referring to. "Under the existing contract, Gazprom owes nothing to Belarus," Gazprom's spokesman Sergei Kupriyanov said in a statement.

Russia triggered the dispute last week when it said Belarus owed it around $200 million for gas deliveries and started to reduce supplies from Monday. Gazprom resumed supplies to Belarus on Thursday after Minsk paid the bill.

But Belarus also retaliated by threatening to cut off Russian flows to Europe if Gazprom did not pay its debt for gas transit. Minsk said Gazprom owed it $260 million but Gazprom paid only $228 million so far.

Russia, the world's largest energy exporter, supplies Europe with 25 percent of gas needs, with four-fifths of that flowing via Ukraine and one-fifth via Belarus.

Russia also supplies 1 million barrels per day of oil to German and Polish refineries via Belarus and flow remained unaffected so far.

While both countries' rhetoric during the spat has been focused on payment issues, analysts say politics, and not economics, are at the heart of the matter.

Most analysts say halting gas supplies was an attempt by Moscow to force Belarus into joining a customs union with Russia and Kazakhstan, a move which Minsk has postponed in hope of better terms.

Lukashenko also gave refuge to ousted Kyrgyz President Kurmanbek Bakiyev, despite Moscow's support for the new Kyrgyz leadership. [ID:nLDE65M0YA]

(writing by Dmitry Zhdannikov; editing by Keiron Henderson)

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