BELARUS NEWS AND ANALYSIS

DATE:

13/01/2007

Belarus fights Russian energy price hike

Staff and agencies

By ALEX NICHOLSON, AP Business Writer Tue Jan 9, 2:00 PM ET

MOSCOW - Russia seems willing to throw its energy weight around, risking cutting off supplies of its oil and gas to Europe as it seeks market prices from neighboring countries that had long depended on cheap energy.

A feud with Belarus over new oil tariffs brought a halt this week to shipments through the main Russian oil pipeline to Western Europe - a major embarrassment for the Kremlin as it seeks to reassure the West of its reliability after a natural gas price fight with Ukraine last year saw brief interruptions.

And Belarus is not the only former Soviet republic taking a stand: Azerbaijan has stopped shipping oil westward via a Russian pipeline, underlining the fact that it now has alternative ways of getting the commodity to market. The move came after Russia angered Azerbaijan by demanding a more-than-twofold price increase for Russian gas.

Last year's dispute with Ukraine ended in a matter of days with a murky deal under which Ukraine agreed to higher gas prices. But the dispute with Belarus shows signs of lasting much longer.

In contrast, Belarus' authoritarian president, Alexander Lukashenko, has quashed his country's opposition parties and is playing the dispute with Russia as one of a small proud nation standing firm in the face of bullying by a huge, energy-rich neighbor.

Russia's state pipeline operator OAO Transneft confirmed Monday that it had stopped oil running through the Druzhba pipeline, but put the blame on Belarus, saying the shutoff was forced by Belarus siphoning off oil to compensate for the Russian duty.

On the contrary, German Chancellor Angela Merkel and EU Commission President Jose Manuel Barroso said Tuesday merely that it was "not acceptable" for energy transit or supplier countries to halt deliveries without consultation - in a clear reference to Russia's unannounced cutoff.

Europe depends on Russia for 30 percent of EU energy imports - including 44 percent of its gas imports - and EU officials have taken pains to express confidence in Moscow's ability to be a stable energy supplier, despite last year's dispute with Ukraine.

President Vladimir Putin warned that production cuts should be considered, an indication that Russia was in no rush to strike a deal and reopen the pipe.

Weafer suggested that a deal could see the duty Russia charges dropped, while Russia would take a stake in Belarus' oil pipeline infrastructure.

The standoff is also a clear indication of the frayed state of relations between the two countries, as Moscow seeks to unravel years of economic support provided in exchange for Minsk's political loyalty.

Just minutes before the New Year, Minsk agreed to pay double for Russian natural gas, after similar hikes were introduced for Russia's other former Soviet neighbors. But the separate decision to charge Belarus $180 was particularly hard to swallow, since Minsk profits handsomely from refining and re-exporting the oil to Europe

"Nowadays Moscow is not that interested in political loyalty and the Belarus regime is an embarrassing ally," Natalia Leshchenko, an analyst at Global Insight, told AP.

"Now, in a sense, Russia is paying for its arrogance in committing itself to economic support. Basically, they have to extract themselves from those obligations," she said.

Source:

http://localnewsleader.com/jackson/stories/index.php?action=fullnews&id=42472