BELARUS NEWS AND ANALYSIS

DATE:

04/01/2007

Russia, Belarus say oil row won't hit Europe supply

By Douglas Busvine and Andrei Makhovsky

MOSCOW/MINSK (Reuters) - Russia and Belarus promised on Thursday to keep pumping oil to Europe, after Minsk slapped a duty on transit shipments of Russian crude in a trade row that has shaken the ex-Soviet states' strategic alliance.

Belarus President Alexander Lukashenko -- branded by Washington as Europe's last dictator -- on Wednesday imposed a transit fee of $45 per ton on crude pumped westwards through the Druzhba ('Friendship') pipeline system.

The move raised the stakes in a dispute in which Russia has imposed duties on oil sales to Belarus, forced Minsk to pay double for gas imports and banned imports of Belarussian sugar.

But, despite trading recriminations, both sides said there would be no disruptions to the two-fifths of Russia's crude exports that are shipped across Belarus. Russia is the world's second largest oil exporter after Saudi Arabia.

"Russia has on many occasions proved itself to be a reliable supplier and there is no threat to deliveries," Kremlin spokesman Dmitry Peskov said. State pipeline monopoly Transneft said shipments were running normally.

Belarus trans-shipped 90 million tonnes (1.8 million barrels per day) of Russian oil last year through the main Druzhba line to Poland and Germany, and through a southern spur to Slovakia, the Czech Republic and Hungary.

"The actions of Belarus will have no impact on deliveries of oil to third countries," said Andrei Popov, a spokesman for the Belarussian Foreign Ministry.

Popov accused Russia of violating free trade and customs agreements. Russia shot back that the transit duty was "unprecedented", but Deputy Economy Minister Andrei Sharonov still urged dialogue.

"We should discuss our differences at the negotiating table and find acceptable solutions, without flaunting our arsenals of retaliatory measures," he told Ekho Moskvy radio.

ESCALATION

Trade tensions have escalated between Moscow and its former Soviet outposts over the past year, with Ukraine and Georgia both paying dearly for daring to turn to the West after their democratic 'color' revolutions.

In contrast, the latest row reflects Putin's anger that Belarus is charging too much for its services as a client state.

Politically, the two countries have much in common, with Lukashenko despising the notion of any democratic revolutions in Belarus with the same disdain as Russia. The two countries have long talked about forming a common state.

But the belief is widespread in Minsk that Russia's energy offensive is part of a Kremlin strategy to force Belarus into a merger on unfavorable terms. Moscow, meanwhile, believes Belarus is exploiting a customs union for excessive gain.

Russia late last year imposed a crude oil export duty of $180 per ton to bring a halt to one lucrative scheme in which Belarussian oil refiners made up to $4 billion a year by buying duty-free Russian crude and exporting finished products.

NO SHUTDOWN

Oil traders doubted that Lukashenko would resort to blocking shipments, noting the transit charge would more or less compensate for the extra cost of the Russian duties on the 20 million tonnes a year of oil sold direct to Belarus.

"I can't believe Lukashenko will shut down Druzhba, which worked uninterrupted even in Soviet times. If he does, he will prove himself to be an irresponsible politician and anger half of Europe," said one trader with a western major.

A second trader working for a Russian oil firm cut short his New Year holiday to come to work, but also doubted there would be any disruptions. "Nobody is cancelling exports so far, because volumes have been presold, they are huge and impossible to reroute promptly," he told Reuters.

A spokesman for the European Commission, Ferran Tarradellas Espuny, told a news briefing in Brussels he did not think there was any threat to EU supply security.

(Additional reporting by Dmitry Zhdannikov)

Source:

http://today.reuters.com/news/articlenews.aspx?type=reutersEdge&storyID=2007-01-04T144124Z_01_L0496064_RTRUKOC_0_US-BELARUS-RUSSIA.xml&WTmodLoc=HealthNewsHome_R3_reutersEdge-3