BELARUS NEWS AND ANALYSIS

DATE:

04/01/2010

Russia, Belarus in energy standoff

AP

An energy price dispute between Russia and Belarus escalated on Monday as the Belarusian state power company threatened to cut off electricity to Russia's westernmost region in apparent retaliation for a Russian oil price rise.

Russia was still shipping oil to Belarus and through the country to Europe, officials said Monday, allaying fears of a repeat of last year's gas cutoff through Ukraine. Russia's Prime Minister Vladimir Putin voiced hope for a quick deal.

However, Putin stressed in televised comments that a solution must be based on Russian law - a signal Moscow would be unlikely to cede any ground on its claims.

"I hope that the agreements will be reached shortly proceeding from our shared interests and Russian legislation," Putin said.

Russia had said earlier that it was ready to provide tax-free oil for Belarus' internal consumption, in line with an existing deal, but would impose a 100-per cent tax on all the oil Belarus processes for exports to the West - three times higher than the current tax.

Belarus buys about 20 million tonnes of Russian crude a year, but consumes only about one fourth of that. The rest is refined and exported to the West, accounting for more than a third of Belarus' export revenues.

Belarusian experts have estimated that the Russian oil tax rise would cost Belarus about $US5 billion ($A5.57 billion) this year, or more than 10 per cent of its gross domestic product.

Belarus' state power company Belenergo warned Moscow Monday that it could retaliate by interrupting electricity transfers to Russia's westernmost Kaliningrad region. The Baltic Sea Kaliningrad region is sandwiched between Poland and Lithuania, which both neighbour Belarus.

Putin has discussed the oil dispute with his energy pointman, Igor Sechin, who reported that Russia began pumping oil to Belarusian refineries Sunday and that Russian crude supplies bound for Europe through Belarus have continued uninterrupted.

Marina Kostyuchenko, a spokeswoman for the Belarusian state-controlled oil company Belneftekhim, confirmed that processing plants are still running and currently receiving Russian oil deliveries. "The amount of supplies is sufficient for their normal operation," she said without elaborating.

She declined to say whether Belarusian refineries had stockpiled oil in case of supply interruptions, but some experts estimated such stockpiles could last for about 10 days.

Belarus said Monday that it was ready to continue talks with Russia and confirmed the transit of Russian oil to customers in Europe through Belarus has not been affected - easing fears of a repeat of last year's cut-off in Russian gas shipments to Europe because of a similar price dispute with Ukraine.

In Moscow, Mikhail Barkov, vice president of the state-controlled Transneft company that runs Russian oil pipelines, also said price arguments with Belarus wouldn't affect Russian oil exports to the West, RIA Novosti news agency reported.

Belarus said Sunday that Moscow's demand that Belarus should pay a higher tax on the bulk of Russian oil shipment contradicted an agreement on customs union signed late last year.

Russia is the main ally and sponsor of Belarus, but relations between the two ex-Soviet neighbours have been increasingly strained by financial arguments. Belarusian President Alexander Lukashenko has accused the Kremlin of trying to subdue his country of 10 million people and to acquire key industrial assets.

Lukashenko's government said Russian officials had put "unprecedented pressure" on its delegation during the price talks, describing them as "totally unacceptable."

Valery Karbalevich, an expert with the Minsk-based Strategia independent think-tank, said Moscow's intention is to strong-arm Lukashenko into selling Belarusian oil refineries to the Russians.

"Lukashenko doesn't want to sell a hen laying golden eggs. Russia now decided to starve the hen if Belarus refuses to share," Karbalevich said.

In the past, Russia successfully applied a similar strategy to force Belarus to cede a controlling stake in its natural gas pipeline network.

Russia's INTER RAO UES spokesman Boris Zverev denounced Belenargo's threat to halt electricity supplies as "blackmail" and which violated the existing framework agreement.

Belarus's Soviet-style economy heavily depended on Russian oil and gas supplied at a lower price compared with other ex-Soviet nations.

In January 2007, Russia briefly cut oil exports to the European Union nations through a Belarusian pipeline as Moscow and Minsk argued over price.

That shutdown, along with natural gas cutoffs to Europe in January 2006 and January 2009 caused by contract disputes with Ukraine, raised doubts in Europe about Russia's dependability as a top energy supplier to the continent.

Source:

http://news.smh.com.au/breaking-news-business/russia-belarus-in-energy-standoff-20100105-lqhq.html


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