BELARUS NEWS AND ANALYSIS

DATE:

09/01/2007

Trade feud flares as Russians, Belarus spar over oil shipments

By Alex Rodriguez

Chicago Tribune

MOSCOW - Russia halted oil supplies sent to Germany and Poland via Belarus Monday, as an escalating trade feud between Minsk and Moscow renewed Europe's concerns about over-dependence on Russian energy.

Moscow had to shut off oil supplies sent to Europe through the Friendship pipeline in Belarus, after it discovered Belarus had siphoned 79,000 tons of Russian oil, according to officials with Russia's Trade and Economic Development Ministry and the country's state-owned pipeline enterprise, Transneft.

Belarus officials said they diverted Russian oil from the pipeline, but only because Moscow had balked at paying Minsk transit fees for permission to use the pipeline.

The dispute put Europe once again in the position of questioning its dependence on Russia for its energy supplies. Last year, in the midst of a row with Ukraine over natural gas prices, Russia shut down gas to Ukraine, which disrupted gas supplies to several European Union countries farther along the pipeline.

The dispute was resolved days later, but Moscow's decision to shut down gas to one of its neighbors in the middle of winter created strong concerns in Europe and Washington about Russia's use of its energy resources as political leverage against other governments.

EU energy chief Andris Piebalgs said Moscow's oil shutdown Monday posed no immediate risk to European energy supplies. Germany has enough oil reserves to last 130 days, and Poland has about 80 days' worth of reserves. Nevertheless, EU officials said they wanted an immediate explanation from Belarus and Russian authorities about why the shutdown occurred.

German Economy Minister Michael Glos told Agence France Presse that Russia's latest energy row with a former Soviet neighbor demonstrated that "one-side dependencies must not be allowed to develop."

Belarus' Foreign Ministry issued a statement saying a team of diplomats from Minsk had been dispatched to Moscow in hopes of resolving the dispute.

Unlike Russia's dispute with Ukraine's West-allied government last year, the new energy battle is between two close allies that have often teamed up to chide Western governments for meddling in the affairs of post-Soviet nations. Regarded by the West as Europe's last dictatorship, Belarussian President Alexander Lukashenko's government is heavily dependent on Russia's economy and on subsidized Russian energy.

However, Russia, the world's largest natural gas producer, has been trying to do away with subsidized natural gas prices to its former Soviet neighbors. Gazprom's recent demand to more than double the price of natural gas sent to Azerbaijan prompted Azeri officials last week to halt delivery of Azeri oil to Russia through a pipeline that runs from Azerbaijan's capital, Baku, to the Russian Black Sea port of Novorossiysk. Under Gazprom's proposal, the price of natural gas to Azerbaijan would rise from $110 per 1,000 cubic meters to $235 per 1,000 cubic meters.

In the case of Belarus, Gazprom wanted to raise gas prices from $46 per 1,000 cubic meters to $105. Belarus balked, and Gazprom threatened to shut down gas supplies to Belarus on New Year's Day, but both sides agreed to a price of $100 and averted a shutdown.

Moscow then imposed an export duty of $180 per ton of Russian oil sold to Belarus. Belarus' economy relies heavily on refinery industry that buys cheap Russian oil and re-exports it in the form of petroleum-based products.

Angered by the export duty, Belarus announced it would charge Russia $45 per metric ton to send oil through the Friendship pipeline to customers in Europe. Russian officials assert that Minsk has now decided to illegally divert Germany- and Poland-bound oil in retaliation.

"This looks like a trade war that Belarus is trying to declare on us," said Andrei Sharonov, Russia's deputy economic development and trade minister. "Naturally, we have counter-measures. One should not forget that Russia is the largest sales market and number one economic partner for Belarus."

Russia uses Belarus' Friendship pipeline to send about 22 million tons of oil to Germany and about 18 million tons to Poland. Another pipeline spur that runs through Belarus carries Russian oil to Slovakia and other east European countries.

In recent months, EU officials have begun to look for alternatives to Russian energy supplies. Last year, European officials went to Kazakhstan to promote the idea of a trans-Caspian Sea pipeline that would allow Europe-bound Kazakh natural gas to bypass Russia's Gazprom pipelines.

Source:

http://www.kansas.com/mld/kansas/news/world/16416159.htm