This report contributes to government efforts by reviewing current standings of the electricity and gas sectors and developing policy recommendations in order to mitigate the impact of gas price increases on the energy sector. Furthermore, the report discusses options for Belarus to strengthen its energy security and maximize benefits from its strategic energy transit location. The report is organized into four sections: (a) assuring sustainable functioning of the electricity and gas sectors; (b) achieving further progress in energy efficiency; (c) diversifying energy supply; and (d) maximizing gas transit benefits. In addition, three appendixes are included. The first appendix describes the Belarus status under the Kyoto Protocol and lists the actions to be completed by the end of 2006. The second appendix provides an indicative list of secondary legislation to complement the legal framework to be established by the law of the republic of Belarus on non-traditional and renewable energy resources; the appendix also reviews various types of renewable energy subsidies. The third appendix develops recommendations on how to increase the production of fuel wood in a sustainable and rational manner.