BELARUS NEWS AND ANALYSIS

DATE:

09/01/2007

Belarus and Russia plan to hold talks in Moscow on oil dispute

Canadian Press: HENRY MEYER

MOSCOW (AP) - ussia and Belarus were to hold negotiations Tuesday on a damaging trade row that has led Moscow to halt oil supplies to Europe via Belarus, the Russian trade ministry said.

A delegation led by Vice-Premier Andrei Kobyakov flew to Moscow Tuesday to find a solution to the transit of oil through Belarus, the Belarusian Foreign Ministry said in Minsk.

Russia on Monday stopped pumping oil to Europe via the Druzhba, or Friendship, pipeline that crosses Belarus, accusing its neighbour of siphoning off oil. The two former Soviet nations are locked in a dispute over a Russian decision to impose hefty duties on oil exports to Belarus.

The pipeline carries oil to Germany, Poland, Hungary, the Czech Republic and Slovakia. The European Union called for the oil deliveries to be resumed "as quickly as possible."

EU energy chief Andris Piebalgs said Monday that the situation posed no immediate risk to energy supplies in the European Union, where refineries maintain strategic oil stocks. But he said that he could convene a meeting later in the week of the bloc's Oil Supply Group to evaluate the situation.

The disruption of Russian oil supplies to Europe once again highlighted concerns about European energy reliance on Russia a year after its pricing dispute with Ukraine led to brief shortages of Russian natural gas pumped to several European nations.

The 4,000 -kilometre-long pipeline has the capacity to ship over 1.2 million barrels a day to eastern and central Europe and generally works at or close to its full capacity.

The pipeline has two branches, one of which runs to Poland and Germany, the other through Ukraine to Hungary, Slovakia and the Czech Republic.

The dispute came just days after Belarus and Russia reached a last-ditch agreement on gas prices that avoided a New Year's cutoff of natural gas for Belarusian consumers and potential supply shortages in Western Europe.

Belarus grudgingly accepted a doubling of the price it pays for imports of Russian natural gas, on which it depends for industry and home heating.

But the two countries are now in conflict over oil duties, with Russia determined to stop Belarus from re-exporting petroleum products made from processing Russian oil bought cheaply under the previous duty-free regime.

Russia and Belarus have been close allies, with Moscow relying on Minsk as a military buffer between it and NATO. In the mid-1990s they signed a loose union treaty.

But analysts say the Kremlin has grown impatient at supporting authoritarian leader Alexander Lukashenko's regime while receiving little in return. The inefficient, Soviet-style state-dominated economy in Belarus and Lukashenko's popularity have depended heavily on subsidized Russian energy.

Last week, Belarus announced it would charge an import duty of US$45 per tonne of Russian oil shipped to Western Europe in pipelines that cross Belarus. The move followed Russia's imposition of an export duty of US$180 a tonne on oil sold to Belarus.

Russia's Deputy Trade and Economic Development Minister Andrei Sharonov said Monday that Moscow would insist on Belarus cancelling the import duty.

Natalia Leshchenko, an analyst with Global Insight, said that Belarus had a strong bargaining position as it was unworried at the consequences of the cutoff to Russian oil exports because it was already treated as a pariah in the West.

"Given the urgency of the matter, the dispute is likely to be resolved soon, and most likely at the expense of Russia," she said in an e-mailed comment. "Transneft (the Russian state pipeline operator) and the Russian government are looking to face financial losses and damaged reputation, whereas the outcast status of Belarus in Europe gives it the benefit of invulnerability, which its government uses in full."

Source:

http://www.cbc.ca/cp/business/070109/b010904A.html