BELARUS NEWS AND ANALYSIS

DATE:

12/12/2006

Russian government raises export duties for oil shipments to Belarus

The Associated Press

MOSCOW: The Russian Cabinet on Tuesday raised customs duties on oil exported to Belarus starting next year, a move that would sharply increase the price Belarus pays for Russian crude deliveries.

The directive issued by Prime Minister Mikhail Fradkov which was posted on the Cabinet Web site envisages that crude oil exported to Belarus would be charged an export duty of US$180 (?135) per metric ton beginning Jan. 1 - the same level which is charged on crude exports to other nations. It wasn't immediately clear how export prices will change, but the move is certain to increase them significantly.

The move signaled a growing rift between the two ex-Soviet neighbors which have signed a union agreement envisaging close political, economic and military ties.

Belarus' authoritarian President Alexander Lukashenko has resisted Russia's push for Belarus' gas pipeline that also carries Russian gas further on to Europe, and Russia's state gas monopoly Gazprom has responded by saying it would quadruple the natural gas price for Belarus starting next year.

The Russian Cabinet said in its directive Tuesday that the oil export duties were increased "to protect Russia's economic interests" in connection with Belarus failing to observe an inter-government agreement on sharing exports earnings from oil products exports.

Russian President Vladimir Putin has earlier accused Belarus of failing to share revenues from exporting oil products made of cheap Russian crude.

The oil price hike will raise the pressure on Belarus, which depends entirely on Russian energy resources. Lukashenko long has become a pariah in the West for cracking down on dissent and extending his rule through flawed votes, and Moscow has been Belarus' main sponsor and ally.

Russia and Belarus have pledged to form a single, union state, but talks on the merger have stalled. Tensions between the two Slavic neighbors have been building up in recent years, as Lukashenko rejected a Kremlin-proposed merger plan. Talks on creating a single currency also have stalled.

Russia has faced Western criticism for a series of sharp energy price hikes for its ex-Soviet neighbors, such as Ukraine and Georgia, which were widely seen as politically-motivated punishment for their pro-Western course.

Commenting on the increase of Russian oil export duty for Belarus, U.S. State Department spokesman Sean McCormack said Tuesday the lacked full details but noted previous U.S. criticism of Russia's policy.

"We've talked about this, our concerns in this regard with Russia before: no country should try to use energy as a weapon in this regard," he said. "We've seen behavior that has raised those concerns before."

Source:

http://www.iht.com/articles/ap/2006/12/12/business/EU_FIN_Russia_Belarus.php