MOSCOW: Russia hopes to reach an oil price deal with Belarus this week that will enable it to resume crude oil flows to its western neighbour and end a dispute that has threatened to disrupt pipeline supplies to Europe.
"I think that by the end of the week the talks will be completed, prices agreed, and by Monday or Tuesday oil shipments to Belarus will take place," Nikolai Tokarev, head of Russian oil pipeline monopoly Transneft, said on Thursday.
Russian oil flows to Belarus' refineries, which have a daily capacity of 360,000 barrels, have been halted since Jan 1 while price talks continue with Russian oil companies.
Transit flows to European refiners via the Belarussian section of the "Druzhba" (Friendship) pipeline network, which typically run at 40 million tonnes a year (800,000 barrels per day), have so far been unaffected.
Tokarev told reporters that intense talks were under way over pricing and that alternate routes were available in case no agreement can be reached and transit flows are threatened.
Moscow has considered using supply routes that would bypass Belarus should it be necessary, including Primorsk on the Baltic, Novorossiisk on the Black Sea and the Polish port of Gdansk. But he added that "such a scenario is very unlikely".
Separately, Energy Minister Sergei Shmatko told reporters that Russia could resume oil supplies to its ex-Soviet neighbour and customs union partner within a week. Tokarev said that Russia had been scheduled to deliver 1.5 million tonnes of oil to Belarus in January.
"We will not supply around half of that due to the supply cuts," he said. Traders told Reuters that exports of Russia's Urals export blend crude would increase during the Belarus oil row.
Rows over prices and transit tariffs between Moscow and the former Soviet states of Belarus and Ukraine have led to Russian oil and gas supply stoppages to Europe in the past.
Preferential prices for Russian oil and gas are crucial for President Alexander Lukashenko's efforts to keep Belarus's ailing economy afloat.
He has trimmed closer to Moscow since his election for a fourth term last month. European leaders strongly criticised the conduct of the election, which was accompanied by a crackdown on opposition protests and the jailing of several rival candidates. With Russia and Belarus forming a customs union together with Kazakhstan from Jan 1, Minsk no longer has to pay Russian oil tariffs. But traders say Russian firms have halted supplies in an attempt to get Belarus to pay higher oil prices.
"This conflict doesn't make relations between Lukashenko and the Kremlin any better," said Igor Kurinnyy, analyst with ING in London. "There are potential risks for Russian oil supply to Europe." Transneft is accelerating construction of a new pipeline system, called BTS-2, that would skirt Belarus and boost its export capacity via the Baltic.
The route was initially scheduled for completion in the third quarter of 2012, but could now be finished by the end of this year. "This will give Russia and upper hand and will strengthen its position in talks with Belarus," said Maxim Moshkov from UBS investment bank. reuters