BELARUS NEWS AND ANALYSIS

DATE:

05/01/2010

Analysis: Russia`s oil spat with Belarus

Russia said on Monday it had resumed oil supplies to refineries in neighbouring Belarus after a brief rupture, but tensions were still simmering.

The following outlines some of the issues at stake:

News of the dispute helped push crude above USD 81 a barrel on Monday, although analysts said the impact was more psychological than physical, as oil markets were well-supplied and Belarussian refineries have at least a week's worth of stockpiled crude.

They also predicted any tensions would be contained as Russia would not wish European customers to consider it an unreliable supplier.

They were unanimous in ruling out upheaval on the scale of last year's gas disruption following a pricing dispute between Russia and Ukraine, which affected supplies for nearly two weeks.

"If the oil cut-off was severe, Europe would take action and aggressively look to diversify supplies. Russia is aware of that," said Michael LaBelle, an independent energy analyst in Budapest who focuses on Central Europe and the Balkans.

"In the short term it is not such a problem because of the stockpiles that are in place. Countries have more options than they do for gas but I don't see it developing into a serious crisis."

The Paris-based International Energy Agency also took the view tensions would be resolved.

"As long as the transit flows and we are not affected we are not talking about a crisis, there are just negotiations going on. We are not worried," said Aad Van Bohemen, head of the IEA's emergency policy division.

Europe overall is less dependent on Russia for oil than it is for gas, although central European countries rely very heavily on crude from the Druzhba, or friendship, pipeline through Belarus.

Russia supplies around 25 percent of the European Union's gas supply, while the Druzhba pipeline carries around 10 percent of the EU's oil supplies.

This winter Russia managed to settle its differences with Ukraine and analysts have said it was anxious to avoid any clash this side of presidential elections on Jan. 17 that might give the Ukrainian President political capital. The incumbent President Viktor Yushchenko, disliked by Moscow, is expected to lose, according to opinion polls.

The timing is less problematic for a dispute with its neighbour Belarus. Relations between the two have been strained since late 2006 when a separate pricing disagreement led to a three-day halt in oil supplies in early 2007.

Russia has said it would gradually increase prices to Belarus and other former neighbours to bring them in line with market levels.

For its part, Minsk has insisted Russia continue supplying duty-free oil not only for volumes consumed domestically in Belarus, but for all transit crude via the country because of a customs union agreement it signed with Russia and Kazakhstan last year.

Analysts said Belarussian President Alexander Lukashenko could have felt his negotiating position was strengthened following a Commonwealth of Independent States summit in December when he ended his reluctance to sign up to the customs agreement.

"(Lukashenko) changed his tone at a CIS summit in Kazakhstan, and the premise is that Russia made some promises. What was promised at the CIS summit is unknown, but it looks like Lukashenko is trying to get them delivered," said analyst Lilit Gevorgyan of IHS in London.

Source:

http://www.moneycontrol.com/news/world-news/analysis-russia%60s-oil-spatbelarus_433934.html


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