BELARUS NEWS AND ANALYSIS

DATE:

03/01/2007

Belarus slaps duty on Russian oil exports

By Andrei Makhovsky

MINSK (Reuters) - Belarus slapped big new charges on Russian oil crossing its territory on Wednesday, causing headaches for refiners in northern Europe and further unravelling Belarus' once cordial ties with the Kremlin.

Belarus President Alexander Lukashenko -- described by Washington as Europe's last dictator -- imposed transit duty of $45 per tonne on Russian oil in retaliation for Moscow cutting subsidies on energy supplies to Belarus.

One million barrels of oil a day, or about a fifth of Russian exports, pass through Belarus. Most of that crude goes to refiners in Poland and Germany.

Market watchers said the transit duty would not affect world oil prices or cause shortages but it was likely to cause short-term disruption to the supply chain as refiners in Poland and Germany look for cheaper alternative supplies of crude.

"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 the holidays."

Russia has been Lukashenko's closest ally after the tough-talking former collective farm boss was cold-shouldered by the West over his human rights record.

But the Belarus leader angrily denounced Moscow for "extremely unfriendly steps" towards its neighbour and said the transit tariffs were his response.

"If Russia, choking on this influx of petrodollars ..., is 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 saying.

TIT-FOR-TAT

Lukashenko has been angered by Moscow imposing full duties on exports of Russian crude to Belarus. This oil is treated separately from transit crude.

Until now, this fuel has been shipped duty free to refineries in Belarus and then re-exported as refined products to other countries in a lucrative tax loophole.

Further angering the Belarus leader, his government was forced on January 1 to agree to pay twice the previous level for natural gas it imports from Russia.

Officials in Moscow said they wanted clarification from the Belarus government about the new charge on oil transit.

"Questions arise as to the substance of the measures, which was not explained by the Belarussian side," Kremlin deputy spokesman Dmitry Peskov said.

"There are also some questions about how it could be imposed on Jan 3, effective from January 1. We need additional details to analyse this decision."

Sergei Grigoriyev, Vice-President of Russia's oil pipeline monopoly Transneft, told Reuters he did not understand how Belarus could impose the duty on Russian oil.

He said though if there was to be a charge it should be negotiated by the two countries' economy ministers.

The transit duty was announced to reporters by Lukashenko's Prime Minister Sergei Sidorsky. Up to now Belarus has charged a shipping fee on Russian oil pumped across its territory but no transit duty.

Moscow says its ex-Soviet neighbours -- even those closely allied to it like Belarus -- should be weaned off subsidies and start paying market prices for energy.

Some in Minsk though see that policy as a betrayal of the special relationship between Moscow and Belarus. The two countries are talking about merging into a single state, as they were for centuries before the Soviet Union broke up.

Just days ago, a different row between Minsk and Moscow over energy briefly threatened to disrupt supplies of natural gas from Russian to Europe.

Belarus threatened to disable a gas pipeline across its territory if a deal was not reached with Gazprom on new prices. Minsk backed down at the last minute.

(Additional reporting by Dmitry Zhdannikov in Moscow)

Source:

http://news.scotsman.com/latest.cfm?id=15242007