BELARUS NEWS AND ANALYSIS

DATE:

04/01/2007

Belarus slaps duty on Russian oil

MINSK, Belarus (AP) -- The government of Belarus has said it will slap a customs duty on Russian oil pumped across its territory to Europe, and President Alexander Lukashenko lashed out at what he called the Kremlin's "shameless" conduct over energy price increases.

The oil transit fee and the fiery remarks were the latest salvos in a politically charged struggle over Russia's moves to end years of preferential treatment that have helped the authoritarian Lukashenko keep his country's Soviet-style economy running and maintain his grip on power.

The actions came after Belarus averted a Jan. 1 cutoff of Russian natural-gas supplies by grudgingly agreeing to pay twice the previous price this year and even more in the future, and appeared aimed at prompting Russia to scrap a new customs duty this year on oil exports to its neighbor.

Belarus has stopped importing Russian oil as it seeks to persuade Moscow to reconsider the duty of $180 per metric ton, saying the additional charge makes oil too expensive and could badly damage the economy.

"If they are drowning in petrodollars and other currency income and have decided ... to place us in conditions worse even than Germany and other European countries, then let's ask this rich Russia to pay us for our services," said an agitated Lukashenko, shouting at times in televised remarks during a government meeting.

Later, Prime Minister Sergei Sidorsky told a news conference Belarus has imposed a customs duty of $45 per metric ton on Russian oil crossing Belarus, also effective Jan. 1. According to government figures, nearly 79 million metric tons of Russian oil went through the nation's pipelines last year; it goes to European Union nations, including the Baltics, as well as Ukraine.

Lukashenko said he had ordered the government "to send Russia a proposal on payment for everything they get here for free -- from military facilities and transit."

The trade disputes reflect severe strains in ties between the two former Soviet republics, which go back centuries and remained very close after the 1991 Soviet collapse but have been frayed in recent years.

Belarus is a key Russian military ally and buffer against NATO, and the nations agreed a decade ago to form a close union. But the recent energy pressure suggests the Kremlin is growing tired of supporting Lukashenko, who has resisted efforts to grant Moscow more control over his country and its economy.

Lukashenko, who gave in to long-standing Russian pressure to sell a half share in his country's gas pipeline system as part of the gas price agreement signed in the final minutes of 2006, said that he had fulfilled Russia's demands and now wants Russia to fulfill his.

He said he had issued Sidorsky "a direct order to sign an unfavorable agreement on gas" because, he said, Russian Prime Minister Mikhail Fradkov had promised that reaching a gas deal would bring a resolution to disputes on the oil customs duty and what Belarus says is blockage of its sugar exports.

The customs duty would deprive the Belarusian government of major profits it has reaped by exporting oil products made from cheap Russian oil.

Lukashenko said it would bring the price of oil to levels that would put "millions of people in Belarus" out of work -- an apparent reference to refineries that are now operating on reserves and other industrial enterprises that could be affected in the nation of 10 million.

He said Belarus is ready to evenly share revenues from the oil products it sells.

Belarusian officials have said they are hoping for a favorable resolution to the oil dispute by mid-January. Russian officials have said little about the issue and could not be reached for comment late Wednesday, amid a holiday that ends next week.

Russian authorities have virtually halted imports of Belarusian sugar as of Jan. 1, said Ivan Danchenko, head of the state-run agricultural production concern Belgospishcheprom. He added that Belarusian sugar producers have lost some $2 million.

Sugar made from Belarusian sugar beets is not subject to Russian customs duties. Belarusian producers began experiencing problems with exports late last year, amid Russian suspicions that they were sending Latin American-produced cane sugar to Russia in the guise of beet sugar to avoid customs duties.

Source:

http://edition.cnn.com/2007/BUSINESS/01/04/gas.belarus.russia.ap/