Azerbaijan to stop importing Russian gas beginning New Year

Russia's demand highlights increasing pressure on this former Soviet republic, which has developed closer ties with the U.S., and raises further questions about the ability of Russia's natural gas monopoly, OAO Gazprom, to meet rising domestic and international demand.

"Imports of Russian gas to Azerbaijan will be halted as of Jan. 1," said Alikhan Melikhov, president of gas company Azerigaz. The move would result in a deficit of 4 billion to 4.5 billion cubic meters.

"This is a very big volume," he said, adding that Azerbaijan would need to introduce a system to decrease gas consumption. Currently, Azerbaijan uses 10 billion to 12 billion cubic meters per year - about half of which it produces itself and the other half it imports from Russia.

Energy officials have said they will try to make up for the shortfall by dipping into the country's gas reserves, seeking to secure Iranian gas and obtaining gas from other sources. Still, they expect to have a shortage.

Earlier, Russia said it would slash the amount of gas it sends the former Soviet republic next year from 3 billion to 1.5 billion cubic meters, and would charge more than twice as much for it - US$230 (?173) per 1,000 cubic meters.

An internal Industry and Energy Ministry report leaked to Russian media estimated that this year Russia would face a 4 billion cubic meter deficit of gas. While Russia has no shortage of gas in the ground - 29 trillion cubic meters - observers warn that Russia must invest more to bring it to use for domestic consumers.

One way of achieving that would be to liberalize domestic prices and provide an incentive to independent producers to sell gas domestically.

Since a price fight nearly a year ago with Ukraine that saw gas supplies to Europe temporarily halted, concerns are mounting in Europe that Russia is moving to use its vast energy resources as a political weapon.

For several former Soviet republics whose policies have not always coincided with Moscow's, Russia has threatened to dramatically hike natural gas prices.

Azerbaijan is the starting-point for a newly completed, U.S.-backed pipeline that transports Caspian oil to Western markets bypassing Russia. It also sent troops to serve in the U.S.-led coalition in Iraq. The Associated Press

/The International Herald Tribune/