BELARUS NEWS AND ANALYSIS

DATE:

14/01/2010

Russian oil cuts to Belarus could be imminent -trade

By Gleb Gorodyankin and Vladimir Soldatkin

MOSCOW, Jan 14 (Reuters) - Time is running out for Moscow and Minsk to reach agreement on terms for Russian oil supplies to Belarus, traders said on Thursday, raising the likelihood of a stoppage in crude flows any time over the next few days.

Russia could soon cut supplies to Belarussian refineries, the traders told Reuters. While this would not affect transit supplies to Europe, it raises the spectre of disruptions should the dispute escalate or should Minsk choose to divert flows.

"I guess oil supply cuts should be expected soon," a trader at a Russian oil major told Reuters.

Europe, mindful of a dispute in 2007 that cut Russian oil supplies via Belarus, is keen that the ex-Soviet states resolve their differences over oil pricing and tariffs. Talks broke down on New Year's Eve and have faltered several times since.

The Belarussian spur of the Druzhba pipeline supplies about one-tenth of Europe's supplies from West Siberia.

Russian oil pipeline monopoly Transneft said on Wednesday oil supplies to one of two refineries in Belarus, Mozyr, could be halted within 24 hours due to the pricing standoff, sparking fears of another cut in deliveries to Europe.

Transneft abstained from comment on Thursday, while traders at several Russian oil majors said supply cuts to Belarus were inevitable should Russia and Belarus fail to strike a deal on crude supplies within the next few days.

"The volumes are not confirmed, as there is no solid agreement," another trader said. "Without the agreement, we will not deliver oil to Belarus."

CUSTOMS UNION

Russia, Belarus and Kazakhstan have agreed to form a customs union, creating common external tariffs and a single market, which should be fully operational from July 1. But principles of bilateral trade have not yet been agreed.

Transneft's first-quarter supply schedule shows that oil is expected to be delivered to Mozyr by Russia's six largest oil firms: Rosneft, LUKOIL, Surgutneftegas , TNK-BP, Gazprom Neft and Tatneft.

"All the companies want to ship oil to Belarus, but the money is an issue," said a Russian trader.

Germany and Poland would be worst affected should the dispute affect transit supplies to Europe. Germany last year received 350,000 barrels per day of crude via the Druzhba pipeline, or just under 15 percent of its total consumption.

Russian Prime Minister Vladimir Putin has said Belarus can now buy 6 million tonnes of Russian oil, for domestic needs only, duty-free.

But while Minsk argues all Russian oil should be duty-free, Moscow now wants payment in full for about 14.5 million tonnes a year of crude that is mostly refined and re-exported.

One of the traders said that, so far, Russian crude for Belarus was fully levied with a custom fee, set at $267 per tonne in January, while Belarus calculated its pre-payments with a discount to that.

"The confirmed volumes are running out. Somewhere next week, the (pre-paid) money could be spent," a Russian company source said.

Source:

http://www.iii.co.uk/news/?type=afxnews&articleid=7705947&subject=general&action=article


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