BELARUS NEWS AND ANALYSIS

DATE:

10/01/2010

Russia, Belarus to reach deal on oil supplies soon

Author: Kostis Geropoulos

Russian Energy Minister Sergei Shmatko said that Moscow and Minsk will soon reach an agreement resolving differences over the supply and transit of Russian oil in 2010. "We hope that the agreement will be reached in the nearest future," Shmatko was quoted as saying by the press.

The dispute between Moscow and Minsk has raised fears in Germany and Poland that supplies may be affected. Belarus buys about 20 million metric tons of Russian oil a year, but consumes only about one-quarter of that. The rest is processed and exported to the West.

Allegations that the flow of Russian oil through the Druzhba pipeline to Belarus was cut off or that Belarus cut the supply of electricity via its territory, following trade disputes between Russian and Belarus are absolutely false, Belarus Ministry of Foreign Affairs Press Secretary Andrei Popov told New Europe on 5 January.

"To the best of my knowledge any allegations of possible cuts of those oil and electricity supplies are absolutely groundless. There are issues of forthcoming agreements between Belarus and Russia on electricity transit and oil supplies to other countries and the talks on those issues are still underway," Popov said, telephonically from Minsk without elaborating.

Asked if he could rule out any energy supply disruptions in the future, he said: "We're not wizards, we're not some kind of magicians; it's not our function to make predictions. We're at the ministry. We're responsible of communicating the official position on that issue and the official standpoint as of now is that the negotiations on those issues are continuing."

On 4 January, the state-run oil company Belneftekhim said Belarusian refineries and oil-pumping stations operated in a stable mode. The transit of Russian oil through pipelines was taking place in a normal mode.

Belarus enjoyed significant discounts on Russian oil imports in 2009, and is seeking a similar deal this year. The crude-oil subsidy for years has helped prop up the government of the authoritarian Belarus President Alexander Lukashenko. The subsidy agreement, which yielded billions in profits annually to Belarus' national oil company, ended on New Year's Eve, and Russian Prime Minister Vladimir Putin said he had no intention of restoring it.

Russia's government hoped to sign a new agreement on oil supplies to Belarus before 31 December and to supply tax-free oil for Belarus' internal consumption. Russia also proposed to provide other exports that run through the Belarusian territory with the full payment of customs duties.

Earlier, Vice Premier Igor Sechin described this step as "an unprecedented proposal." "It is aimed at synchronizing the operation of Russian and Belarusian enterprises. They will operate on similar conditions," he said. Russia warned that in this case a 100% payment regime would enter into force as of 1 January, Itar-tass reported.

Minsk, in turn, confirmed its readiness to continue the talks. At the same time, Belarus proceeds from the assumption that "until the relevant documents are signed Russia should provide tax-free oil supplies for Belarus' internal consumption in January-February 2010 in compliance with the agreements reached by the two countries' presidents earlier."

The Belarusian government focused the attention that during the talks "an unprecedented pressure" was put on the Belarusian delegation. "In fact, it was proposed to violate the basic treaty on the creation of a common customs territory and of the Customs Union that was signed by the presidents of the three countries - Belarus, Russia and Kazakhstan," the press service of Lukashenko's government said.

Putin wants to settle pending issues over oil transit with an ambition to get ownership over the pipeline infrastructure in Belarus. Chris Weafer, chief strategist at Russia's Uralsib Bank, told New Europe on 5 January that the timing has to do with the start of the talks to create the customs union between Russia, Belarus and Kazakhstan in 18-months time. "It is very obvious to everybody that Belarus cannot afford to pay the new duty regime - it simply cannot afford that - and I don't think anybody expects Belarus to pay it. I believe Russia's objective is to end up with a similar result as it did with gas which is that Russia would own at least 50 percent of the oil transit infrastructure in Belarus. That's something that Russia is very keen to do in the early stage of negotiations on the customs' union and get it out of the way," Weafer said.

Right now Belarus has very few options despite attempts by Lukashenko to improve relations with the European Union. It is quite clear that the EU, the US and China are not interested in pushing better political or economic links with Belarus, Weafer said. "I believe that reasonably soon - i.e. in the next couple of weeks - we will see a deal being negotiated similar to that of gas with Russia taking an ownership stake in the infrastructure and that will put Russia in a much stronger position going forward," Weafer said.

"The EU's priority at this point is to consolidate the improved relationship it has with Russia. After so many years of difficulties it now has the best relationship with Moscow that it had for a very long time and I don't think they would risk that by even giving encouragements to Belarus," Weafer said.

If Russia gained control of the oil transport infrastructure in Belarus, it could work in the EU's favor. "In general terms it now has been accepted by the EU and I guess the US, but certainly the EU, that they are better off in a situation where Russia has greater control of the energy infrastructure and that way then they only have to deal with Moscow and Russia can take care of any sort of difficulties on the transit route or production," Weafer said. "Trying to do a deal with other countries the whole thing gets complicated."

Source:

http://www.neurope.eu/articles/Russia-Belarus-to-reach-deal-on-oil-supplies-soon/98342.php


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