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Gazprom says it will cut gas supplies to Belarus by 45 percent as of Aug. 3

Gazprom, Russia's state-controlled gas monopoly, said Wednesday that it will reduce natural gas supplies to Belarus by 45 percent as of Aug. 3 after Minsk failed to pay in full for previous gas shipments.

The company tried to allay fears that the decision could reduce gas flowing to Europe through a key transit pipeline that handles more than 20 percent of Russia's gas exports to Europe.

"Gazprom will take all possible measures for the transportation of Russian gas through the territory of Belarus in full accordance with current obligations before European customers," the company said in a statement.

The announcement came after Russia's former Soviet neighbor missed a July 23 deadline for payment of part of an outstanding gas bill. Alexander Ananenkov, Gazprom's acting chief executive, was due to make an announcement about Belarus later Wednesday at Gazprom's Moscow headquarters.

Gazprom spokesman Sergei Kuprianov said that the transit pipeline supplies customers in Germany, Poland, Lithuania and Ukraine as well as the Russia's Baltic enclave of Kaliningrad.

"We are acting in strict accordance with our contract," Kuprianov told The Associated Press.

Gas price talks between Russia and its neighbors have been closely watched in Western capitals after Gazprom's decision to raise gas prices in 2006 led to a brief cutoff of gas supplies to Ukraine.

Deliveries to Europe fell as Ukraine skimmed the gas it needed from a major export pipeline transiting its territory. Russia was widely perceived to have used the price increase to punish Ukraine's new western-leaning leaders.

The incident also raised concerns in the European Union about its dependence on Gazprom, which meets a quarter of Europe's gas consumption.

A similar incident appeared to be shaping up with Belarus at the end of the year. Just minutes before the New Year, Minsk agreed to pay US$100 per 1,000 cubic meters of gas, compared to a previous price of US$47.

To soften the blow for the Belarus economy, which is heavily reliant on cheap energy from Russia, it was agreed that Minsk would pay just US$55 per 1,000 cubic meters for the first half of the year with the difference of nearly US$500 million to be paid by July 23.

Belarus Prime Minister Sergei Sidorsky was in Moscow on Monday to discuss the terms of a Russian loan to help Minsk pay its gas bill. No agreement on the loan was reached, however.

Belarus also agreed to sell half of its national pipeline company Beltransgaz to Gazprom for US$2.5 billion. Gazprom has so far paid US$625 million of that, but the money has been transferred to the Belarus finance ministry, rather than being used to cover the bill.

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