BELARUS NEWS AND ANALYSIS

DATE:

11/01/2007

Russian-Belarusian Relations: Energy War

ALEKSANDER FADEEV,

The Institute of the CIS countries, Moscow

At present I would not say that Belarus' lifting duties on the Russian oil transit to Europe gives evidence of a compromise between Moscow and Minsk. It is still possible that during the negotiations between Belarusian and Russian Prime Ministers Siarhiej Sidorski and Mikhail Fradkov compromise will not be achieved.

Although in the present situation President Aliaksandr Lukashenka doesn't have space for political maneuver. Belarus is fully reliant on Russian energy resources. Minsk won't be able to reduce the oil dependence in the near future and the gas dependence - even in the-medium term future.

The Belarusian authorities had no alternative but to unblock the oil pipeline lifting the transit duties on the Russian oil. Belarus cannot serve the needs for oil with its own resources.

Belarus can produce about 1.5 million tons of oil at most, while its consumption is about 6 million tons. 42% of the export gains are due to the sales of oil products manufactured by the biggest Belarusian oil refineries. The permanent workload of those enterprises requires crude oil that is supplied through the Druzhba (Friendship) oil pipeline that was blocked on January the 8th.

Belarus' reserves will last for two weeks, and given the strategic reserves - for three weeks.

As regards Russia, it was not ready for such a situation. It didn't have alternative supplies routes covering the volume of transit oil that crosses Belarus.

So, Russia is also interested in achieving compromise. But this does not mean that Russia will lift the export duty on oil supplied to Belarus. Temporary reduction is possible that will permit to smoothly transfer the prices for oil supplies to the world market level.

Lifting the duty would be regarded as an evident concession. In response, Belarus would try to revise the gas agreements that were achieved with great difficulty. Russian officials bear this in mind and so they are unlikely to lift the duty.

During the negotiations the Russian authorities will also take into account interests of the Russian business. It stands to reason that interests of the business and those of the state can be different in this matter. But until now the Russian authorities have managed to balance between interest of the Russian business and Russia's national interests. I believe that the present case won't be an exception, because the oil companies and Transneft couldn't have settled the issues of trade with Belarus without the government's support.

Source:

http://www.eurasianhome.org/xml/t/expert.xml?lang=en&nic=expert&pid=927&qmonth=0&qyear=0