Money talks

Russia's state-run energy giant, Gazprom, purchased the gas pipeline system in neighboring Belarus on Friday, providing Moscow with more control over the transit routes that run to its primary energy customer, the European Union.

Belarus, an authoritarian state in eastern Europe, currently faces its most severe economic crisis since the collapse of the Soviet Union in 1991. Until now, long-time President Alexander Lukashenko had been wary to cut an energy deal with Moscow out of concern for Belarusian national sovereignty. Gazprom already owned half of the pipeline system.

In exchange for ceding full control of its pipeline system for $2.5 billion (1.89 billion euros), Belarus is set to receive gas from Russia at a significantly reduced price, paying 40 percent less in the first quarter of 2012 compared to the third quarter of 2011. That could help alleviate the pressure on an economy which has experienced a 65 percent devaluation of its currency and runaway inflation.

'Eurasian Union'

Moscow has also agreed to lend Belarus $10 billion for the construction of a nuclear plant as a part of the energy deal. Russia has sought to lure Minsk deeper into its political orbit in a bid to advance the idea of a Eurasian Union, an economic and political project championed by Russian Prime Minister Vladimir Putin that seeks deeper integration between the former Soviet republics.

"Belarus will get a so-called integration discount, and within the next few years it will move to pricing parity (with Russian domestic gas prices)," Putin said.

Russia provides the EU with a quarter of the 27-nation bloc's natural gas imports. Moscow moves 20 percent of its Europe-bound product through Belarus and Turkey with the other 80 percent delivered through Ukraine. In the past, pricing disputes between Russia and its two former Soviet clients have led to disruptions in energy supplies in the EU.

Author: Spencer Kimball (AP, Reuters)
Editor: Andreas Illmer