BELARUS NEWS AND ANALYSIS

DATE:

13/01/2007

Russian Official Laments Oil Dispute

By MIKE ECKEL

The Associated Press

MOSCOW -- Russia's trade minister acknowledged Saturday that his country's reputation as an energy supplier suffered in the dispute with Belarus that disrupted oil exports to Europe, and said Russia must build more alternative export routes.

German Gref, who took part in top-level negotiations that concluded late Friday, said it will take years for Russia to overcome European fears about Moscow's dependability, which had already been damaged by last year's price dispute with Ukraine. That dispute resulted in temporary shortages of Russian gas to European customers.

"The (reputation) that we enjoyed has been undermined to some degree, and it must be repaired" said Gref, Russia's trade and economic development minister. "We must create a system so that supplies depend only on us, not on transit partners."

Russia on Monday stopped shipping oil to Europe through a major pipeline that crosses Belarus. Russia accused Belarus of siphoning off oil to cover a transit fee it had imposed in response to a duty Russia placed on oil exports to Belarus. Germany, Poland and other European countries saw a disruption in oil supplies as a result.

Russian oil shipments resumed early Thursday after Belarus lifted the transit fee, and the two countries agreed Friday to lower the Russian export duty by about 70 percent. They also agreed that Russia would get most of profits from refined oil products Belarus makes using Russian oil and then sells to Europe.

In Minsk, meanwhile, Belarusian Vice President Andrei Kobyakov said that the agreement was fair, even though the country stands to sacrifice billions in revenues from refined oil products. He also said the government did not expect domestic consumer or producer prices to rise.

"This agreement is the most fair and it will prevent escalation," Kobyakov told reporters.

Kobyakov said Belarus will garner $1.5 billion in revenue this year under the new arrangement _ less than half what it was previously earning.

Belarusian analyst Yaroslav Romanchuk, however, said the loss in revenue from re-exported oil products and the cost from higher natural gas costs could total up to 8 percent of the country's GDP. Russia this year also doubled the price it charges Belarus for natural gas.

"In essence, this will catalyze market reforms in Belarus, but whether this will suit the Belarusian leadership is an open question," Romanchuk told The Associated Press.

European officials have watched the disruption with concern, voicing anew worries about Russia's reliability as an energy supplier. The United States and others in the West _ who have made Belarus and its repressive president a pariah _ have also accused Russia of trying to use its vast energy resources as a political weapon.

Javier Solana, the European Union's foreign affairs chief, said in a statement that the bloc welcomed the agreement, but said the disruption "points to the need for a better understanding between the European Union and Russia on the basic principles of a future energy partnership."

Associated Press Writer Yuras Karmanu contributed to this report from Minsk, Belarus.

Source:

http://www.washingtonpost.com/wp-dyn/content/article/2007/01/13/AR2007011300691.html

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