BELARUS NEWS AND ANALYSIS

DATE:

03/01/2007

Belarus slaps duty on Russian oil exports

By Andrei Makhovsky

MINSK, Jan 3 (Reuters) - Belarus imposed export duty on Russian oil crossing its territory on Wednesday -- with a potential impact on oil markets -- as President Alexander Lukashenko hit back at Moscow in an energy row.

Belarus Prime Minister Sergei Sidorsky said his government was imposing a duty of $45 per tonne on Russian oil that transits his country en route to customers in Europe.

About 1 million barrels of Russian crude a day -- over a fifth of Russia's total exports -- are shipped via the Druzhba pipeline that passes through Belarus. Most of it goes to customers in Germany and Poland.

Russian oil pipeline monopoly Transeft said Belarus had no right to impose the duty but traders were worried enough by the possible impact on supplies to interrupt their New Year holiday, which lasts until Jan. 9.

"I do not exclude the Belarussians could do something weird, which may paralyse Russian oil exports to Europe," one trader with a Russian oil major told Reuters.

"The volumes in question -- to Poland and Germany -- are huge. I am coming to work tomorrow despite holidays."

Minsk's move came in response to Moscow's decision to impose full duties on exports of Russian crude to Belarus. Until now, these have been shipped duty free to refineries in Belarus which has then re-exported them as refined products to other countries in a lucrative tax loophole.

Belarus has also been forced to agree to a twofold increase in the price it pays for imports of Russian gas, angering Belarus's President Alexander Lukashenko.

"If those in Russia, choking on this influx of petrodollars and other sources of hard currency, are still willing to make a scapegoat of Belarus ... then let's ask the Russian Federation -- so huge and so rich -- to pay us in full for our services," state news agency BelTA quoted Lukashenko as telling his ministers on Wednesday.

Soon after, Sidorsky called in reporters to announced the transit duty on Russian oil.

Transneft said it was legally impossible for Belarus to impose the duty.

"Belarus cannot impose any export or additional transit duty, because the oil belongs to Russia," Transneft Vice-President Sergei Grigoryev told Reuters. "As for the transit shipping fee, it's set by inter-governmental agreements, and therefore it cannot be changed without Russia's accord."

"Therefore, we are not worried."

Russia and Belarus share many of the same political and cultural values and have been in talks for years about merging into a single state.

But disputes in the past few months over energy have soured the relationship. Moscow says its ex-Soviet neighbours -- even those closely allied to it -- should be weaned off subsidies and start paying market prices for energy.

Washington has described Lukashenko as Europe's last dictator because of his tough line on dissent and firm grip on power. But Lukashenko has traditionally been able to rely on support from Moscow.

Last month Russia's government said it would impose an export duty of $180.70 per tonne of oil exported to Belarus from 2007. Oil exports to Belarus were previously free of tax.

Belarus refineries are estimated to have consumed around 20 million tonnes of Russian crude last year.

Russia and Belarus this week signed the new gas price deal after last-minute talks beat a Jan. 1, 2007 deadline. The deal narrowly averted supply disruptions to Europe because Minsk had threatened to disable the pipeline shipping Russian gas to European customers.

Under the deal, Belarus must now pay $100 per 1,000 cubic metres of gas, up from $45.

(Additional reporting by Dmitry Zhdannikov in Moscow)

Source:

http://today.reuters.com/news/articleinvesting.aspx?view=CN&storyID=2007-01-03T184057Z_01_L03714172_RTRIDST_0_BELARUS-RUSSIA-UPDATE-2.XML&rpc=66&type=qcna