BELARUS NEWS AND ANALYSIS

DATE:

11/01/2007

Oil flows again between Russia and Belarus

Russian oil began flowing again through a Belarusian pipeline, signalling an end to a dispute that caused relations between Minsk and Moscow to plummet and sent ripples of doubt across Europe.

Russian oil entered the Belarusian system around 10.30pm local time yesterday, said Alexei Kostuchenko, general director of pipeline concern Gomeltransneft-Druzhba. He did not give any details about the volume being moved.

There was no immediate word from Russian oil officials about the shipments, which were resumed hours after the Belarusian government lifted a transit tax on Russian oil shipments.

"We informed the Russian side that, in accordance with agreements reached, Gomeltransneft-Druzhba has begun the transport of oil in the directions of Poland, Germany, Ukraine, Slovakia, the Czech Republic and Hungary," Kostuchenko said.

The spat between the two ex-Soviet republics showcased the Belarus regime's reliance on cheap Russian energy imports - and stoked doubts in European capitals about Russia's dependability as an energy supplier.

"The disruptions in oil supplies have yet again undermined Russia's efforts to establish itself as a reliable source of fuel supplies to Europe," Deutsche UFG analysts wrote in a note to investors.

The three-day dispute centred on Russia's decision last month to impose a hefty duty on oil exports to Belarus, with Moscow complaining that the previous duty-free regime cost the Russian budget up to ?3bn a year in lost revenues. Belarus reaped billions in revenues by refining cheap Russia oil products and selling them at hefty profit to European markets.

Minsk - whose centrally-controlled economy relies on cheap Russian energy and duty-free trade with Russia - responded last week by slapping a ?34 per ton tax on Russian oil pumped across Belarus to Europe.

On Monday, Russia stopped pumping oil to Europe via the Druzhba pipeline - whose name translates as "friendship" - and accused its neighbour of siphoning off oil. By Tuesday, the stoppage had affected supplies to Ukraine, Germany, Poland and other east European nations.

With the European Union voicing alarm and criticism and Russia threatening an all-out trade war against its former ally, the two countries' presidents - Vladimir Putin and Alexander Lukashenko - held talks by telephone yesterday.

Soon after, Belarus' government announced the cancellation of the ?34 duty and prime minister Sergei Sidorsky said he would fly to Moscow today for meetings with his Russian counterpart.

"I hope that within two days we will be able to overcome all disagreements - on oil, oil products and other sensitive groups of commodities on the Russian and Belarusian markets," he said.

In Moscow, Kremlin spokesman Dmitry Peskov said the announcement was "cause for restrained optimism" and more talks between the two sides were expected.

Putin's top economic adviser, meanwhile, reasserted that Russia was a dependable energy supplier. "We act as a reliable partner, and we would like to do so in the future," Igor Shuvalov said.

"We need to understand that that kind of behaviour very close to blackmailing can't be accepted by the Russians," he said. "Now we need to act together, the Europeans and the Russians, to avoid this kind of situation in the future."

Russian state-controlled pipeline operator OAO Transneft said yesterday that pumping would resume after Belarus released 80,000 tons of oil that Moscow claimed had been siphoned off and stored in Belarusian holding tanks.

EU leaders strongly criticised the disruptions, which came a year after a price dispute between Russia and Ukraine led to a brief interruption of EU natural gas imports from Russia.

Source:

http://breakingnews.iol.ie/news/story_business_island.asp?j=206762690&p=zx6763396