BELARUS NEWS AND ANALYSIS

DATE:

25/10/2006

Russia may cut oil supplies to Belarus - Putin

MOSCOW/MINSK, Oct 25 (Reuters) - Russia may cut oil supplies to its ally Belarus if Minsk keeps using the crude, imported on favourable terms, for lucrative oil products exports to third countries, President Vladimir Putin said on Wednesday.

Russia and Belarus form a free trade zone and leaders of the two ex-Soviet neighbours have long flirted with the idea of closer integration which might one day culminate in a political union.

Relations have been strained, however, by friction on the energy front, with Belarus charging far lower oil export duties than Russia which make it profitable to export products refined in Belarus from Russian crude.

"We still cannot reach an agreement (with Belarus) on joint standards to be applied to custom duties," Putin said in a televised question-and-answer session.

"We are really worried by some export and import issues when we look at the volume of our crude oil supplied to Belarussian oil refineries, the republic's actual consumption, and then at the volume of oil products that are sold abroad (from Belarus)."

Putin said Russia was now seeking to "establish a normal dialogue with our Belarussian colleagues."

But he added: "If we fail to reach an agreement, we will be forced to impose some limitations which we would not want to do." He did not elaborate.

Russia has urged Belarus to adjust export duties for crude and oil products in the past, but analysts regard Putin's remarks as another sign of Moscow putting political pressure on Minsk, following its threat to raise gas prices in 2007.

"It is no doubt one of the elements of pressure on [Belarussian president Alexander] Lukashenko to make him agree with Russia's conditions of integration, possibly to convince Belarus to become a non-sovereign part of Russia," said Leonid Zaiko, head of the Belarussian think-tank Strategy.

EXPORT DUTIES

In the first half of 2006, Belarus imposed an export duty for light and middle distillates and gas oil of $57 per tonne, compared with $150 per tonne in Russia.

The export duty for fuel oil in Belarus was $37.5 per tonne against $79.2 per tonne in Russia.

Two Belarus' refineries, Mozyr and Naftan, had recently cut throughput after Russian crude pipeline monopoly Transneft cut its crude supplies to Belarus by 30 percent citing an oil leak.

The Mozyr refinery, 42.5-percent share of which belongs to Russian oil firm Slavneft, cut refining by 19 percent to 25,000 tonnes (183,000 barrels). Naftan has stopped one of its crude distillation units.

Experts estimate Belarus' profits from exports of crude products made of Russian crude at $3.7 billion in the first six months of this year.

"If the schemes of shipping crude via Belarus are liquidated, it will have very negative consequences for Belarus. It will soon be clear that our 'economical miracle' was mainly based on the sale of oil products," said Zaiko.

Source:

http://asia.news.yahoo.com/061025/3/2ruw8.html