BELARUS NEWS AND ANALYSIS

DATE:

14/12/2006

Belarus criticizes Russian hike of oil export duties

The Associated Press

MINSK, Belarus: Belarus' Foreign Ministry on Thursday slammed Russia's decision to hike customs duties on oil exports to Belarus, saying it violated bilateral agreements.

The decision Tuesday by the Russian Cabinet will sharply increase the price Belarus pays for Russian crude deliveries and comes amid a parallel effort by Moscow to sharply hike natural gas prices amid an escalating rift between the two ex-Soviet allies. Both moves will badly pinch Belarus' Soviet-style, centrally-planned economy, which has relied on cheap energy from Russia.

At a briefing in Minsk, Foreign Ministry spokesman Andrei Popov criticized Moscow's decision to charge an export duty of US$180 (?135) per metric ton beginning Jan. 1. Russian crude deliveries to Belarus had previously been exempt from duty under free trade rules which are part of the bilateral union agreement.

"We consider that the introduction by the Russian government of customs duties on oil deliveries violates a series of agreements that set out a system of free trade without seizure or restrictions between our countries," Popov said.

The hike, which Russia exporters will pass along to Belarus, will deprive Minsk of profits it has reaped by exporting oil products made of cheap Russian oil. Some experts estimated that as much as 8 percent of the country's total gross domestic product comes from the re-export of oil products.

Belarus was to import 20 million tons of oil this year and planned to increase the amount to 21.5 million tons next year - while the country's domestic demand hovers around 12 million tons.

"Russia has declared an energy war against Belarus which will lead to a collapse of Belarus' economy which is built on the Soviet model," said Mikhail Chigir, Belarus' former prime minister turned opposition activist.

Belarus' authoritarian President Alexander 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.

Lukashenko was set to hold talks with Russia's President Vladimir Putin in Moscow on Friday.

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.

Lukashenko also has resisted Russia's push for control over 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 latest hike in oil customs duties prompted the U.S. State Dept. to weigh in, warning Russia against using its vast energy resources as a weapon.

Source:

http://www.iht.com/articles/ap/2006/12/14/business/EU_FIN_Russia_Belarus_Oil.php