BELARUS NEWS AND ANALYSIS

DATE:

03/01/2010

Russia stops oil shipments to Belarus

By Charles Clover and Reuters

Russia has stopped shipments of oil to Belarus following a dispute about pricing, oil traders reported Sunday.

It was apparently the first such cut-off since January 2007, when Russia stopped pumping oil to Belarus for three days following a similar tariff dispute, which was eventually resolved in Russia's favour.

The move will set off alarm bells in Europe, amidst memories of last January's gas war between Russia and Ukraine which left several cities without heat and power for days. Oil, however, is more fungible than gas, and easily made up with alternative suppliers, so the consequences of the dispute are unlikely to be anywhere near as severe.

Reuters news agency reported that despite the shut off to Belarusian refineries, oil exports to Europe were still flowing, and that refineries in Belarus still have a week's worth of oil stockpiles.

The cut off follows the failure of negotiations between Minsk and Moscow in the closing days of last year on new tariff arrangements for transit of Russian oil onward to Europe.

On January 1, a spokesman for the Belarusian government told Interfax news agency that "unprecedented pressure" had been put on their delegation during the negotiations and called on Russia to continue supplies to Belarus under the old terms, until a new agreement could be reached.

It warned that Russian demands would violate a customs union agreement signed last year by Belarus, Russia, and Kazakhstan, and "would undermine all agreements reached on the further integration of our states"

The dispute is likely to present a further obstacle to closer ties between the two countries. Belarus is Russia's closest - and virtually only - ally amongst the former Soviet republics.

Russia and Belarus signed a series of treaties aimed at unifying their countries in the 1990s, though these have failed to be realised amidst friction between the Kremlin and Belarusian strongman Aleksander Lukashenko. Likewise, the customs union agreement remains largely on paper.

The impasse follows a near stoppage of Russian oil flows to Ukraine last week, after Kiev increased transit fees for Russian oil by 22 per cent. Russia eventually acceded to Ukraine's demands, averting a cut off of supplies.

Much more serious is that matter of gas supplies, and the deadline for Ukraine to pay for December supplies is Jan 11. Officials from both countries insisted, however, that Ukraine is capable of paying.

The International Monetary Fund last Wednesday agreed to a technical change in its loan program with Ukraine that will allow Kiev to free up resources to pay for Russian gas supplies.

Source:

http://www.ft.com/cms/s/0/45e87598-f863-11de-beb8-00144feab49a.html


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