BELARUS NEWS AND ANALYSIS

DATE:

09/01/2007

Reports: Belarus delegation in Moscow

By HENRY MEYER

BW Exclusives

A high-level Belarusian delegation arrived Tuesday in Moscow to hold urgent negotiations on a trade row that has led to Russia's halting oil supplies to Europe via Belarus, news agencies reported.

Vice-Premier Andrei Kobyakov will meet with Russian officials to find a solution to the transit of oil through Belarus, the Belarusian Embassy in Moscow was quoted as saying by ITAR-Tass and RIA-Novosti. Spokespeople at the Embassy could not immediately be contacted.

Russia on Monday stopped pumping oil to Europe via the Druzhba, or Friendship, pipeline that crosses Belarus, accusing its neighbor 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-kilometer-long (2,500-mile-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 (euro34) per metric ton 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 (euro135) a ton on oil sold to Belarus.

Natalia Leshchenko, an analyst with Global Insight, said that Belarus had nothing to lose by cutting off 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.businessweek.com/ap/financialnews/D8MHL53O0.htm