BELARUS NEWS AND ANALYSIS

DATE:

01/01/2010

Belarus eyes duty-free Russian oil pending 2010 deal

MINSK, Jan 1 (Reuters) - Belarus said on Friday it wanted to continue receiving Russian oil tariff-free as the two sides strive to agree a new pricing structure for 2010 and avoid a fresh energy war that could cut crude supplies to Europe. Talks between the ex-Soviet states broke down on New Year's Eve, raising concerns in Germany and Poland that supply disruptions experienced in January 2007 after a similar dispute could be repeated. Oil supplies, however, are still flowing.

Belarus complained on Friday of heavy-handed negotiating tactics exerted on its officials during end-of-year talks in Moscow, and said the high prices proposed by Russia would breach the terms of a fledgling customs union between the countries.

"Until such time as the documents are signed ... duty-free oil supplies for the domestic consumption of the Republic of Belarus in January-February 2010 should be carried out in accordance with the agreements reached earlier by our presidents," the Belarussian government said in a statement.

It said that its delegation to Moscow was "put under unprecedented pressure, which, according to the Belarussian side, is totally unreasonable and unacceptable".

But Minsk also said it wanted to sign a deal on oil supplies and was prepared to resume talks at any time.

Belarus receives about 400,000 barrels per day from Russia via the Druzhba pipeline to process at its two refineries, and exports most refined products to the West while consuming a much smaller portion domestically.

A Russian government source told Reuters late on Thursday that oil flows to Belarus would not be affected. [ID:nLDE5BU0R1]

Interfax news agency on Friday quoted the head of one of the companies operating a section of the Druzhba pipeline in Belarus as saying supplies had not been disrupted.

"Oil flows along the pipeline are working as normal, both the transit of Russian oil and supplies to the refinery," Sergei Sosnovsky, general director of Gomeltransneft Druzhba, said.

DUTY ABOLITION

In November, Minsk signed documents on the establishment of a trilateral customs union with Kazakhstan and Russia.

Following talks in December between Belarussian President Alexander Lukashenko and Russian President Dmitry Medvedev, it was reported that oil for the domestic consumption of Belarus would be supplied duty-free.

The avoidance of any immediate supply cuts will be greeted with relief in Germany and Poland after the disruptions three years ago. But while a deal is still pending, the threat will persist.

Druzhba, one of the world's biggest pipelines by length and capacity, supplies major refiners in Germany covering some 15 percent of the country's oil needs, while Poland relies on Druzhba for more than three-quarters of its consumption.

European politicians have repeatedly accused the Kremlin of using its energy might as a tool of intimidation of its neighbours, be it gas or oil deals with Belarus or Ukraine.

Russia, the world's largest oil and gas producer, says it is simply switching gradually to market terms after subsidising neighbours with cheap energy for years. For a factbox on Druzhba see [ID:nLDE5BU0QZ]. (Writing by Conor Sweeney in Moscow, editing by Mike Peacock)

Source:

http://uk.reuters.com/article/idUKLDE60003K20100101


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