Russia and Belarus Oil & Gas Price War a Ticking Time Bomb

Russia and Belarus feud over oil and gas prices as Belarus counts the days until they are out of oil stocks

BY: John Shimkus

Russia has cut off oil supplies to Belarus-its neighbor and former Soviet Republic-leaving the small Eastern European country with only one week's worth of oil stocks, which has European traders holding their breath. Russia has served as the main supplier of oil to the two largest refineries in Belarus: Mozyr and Polotsk. These two refineries are among the largest employers in Belarus, and the implications of oil stocks running out are staggering, especially since Belarus has been fighting its way out of a countrywide economic crisis since 2009.

Moscow is holding its ground, demanding a $45 per metric ton price increase for their crude oil. This is both in response to the world market and Belarus' decision to raise transit tariffs 12.5% on the Russian oil and natural gas lines that run through the country connecting Russia to Western Europe. The two countries once had a thriving partnership in which Russia paid lower tariffs to Belarus in exchange for a reduced price on crude oil. However, market pressures have made those arrangements economically unviable, and the new realities of the oil and natural gas markets are creating conflict between the two nations.

Belarus is currently looking to Venezualan oil to fill the void in their oil refineries' stock, but the 38,000 barrels a day Venezuela is shipping in is not enough to meet the 360,000 barrels per day quota that Belarus' refineries typically operate at.

Russian oil pipeline monopoly, Transneft, has diverted much of the oil supply bound for Belarus to other neighboring countries and seaports; however, it is estimated that " rel="nofollow">Russian oil is still crossing Belarus to reach European markets via the Druzhba (friendship) pipeline at a rate of 800,000 barrels per day.

Source: Office for a Democratic Belarus


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