BELARUS NEWS AND ANALYSIS

DATE:

03/01/2010

Dispute looms as Russia suspends Belarus energy supplies

 Negotiations fail after Russia halts oil deliveries to Belarus

 Repeat of last year's dispute unlikely, say energy watchers

* Tim Webb

* guardian.co.uk,

Energy supplies to Europe could be disrupted again this winter after Russia cut oil supplies to neighbouring Belarus in a dispute over tariffs.

The dispute will again raise concerns across Europe about the increasing dependence on Russian energy and the political influence it affords the Kremlin, adding further urgency to discussions on security of supply.

Russia halted deliveries to refineries in Belarus on New Year's Eve and fresh negotiations this weekend between the two sides failed to result in an agreement on prices for 2010. Belarus yesterday accused Russia of exerting "unacceptable" and "unprecedented" pressure in the talks, and said Moscow's demands undermined attempts at closer economic integration between the two ex-Soviet neighbours.

Most of the oil Belarus imports from Russia is refined and shipped to Europe. Belarus's refineries have a week's worth of stockpiles so there has been no immediate effect of the dispute.

Disputes over energy supplies between Russia and its neighbours have become commonplace at the beginning of the year when both sides engage in brinkmanship to get the best deal on tariffs for the year. Sometimes they have serious consequences for the rest of Europe, which relies on Russia for most of its gas and much of its oil.

This time last year, Russia cut off gas supplies to Ukraine, which in turn halted shipments to the rest of Europe. As a result, wholesale gas prices soared and millions of households in Eastern Europe went without heating for days.

Belarus ships 400,000 barrels of oil per day westwards via Russia's Druzhba pipeline, one of the world's biggest. Germany relies on more than a tenth of its oil needs on Belarus and three quarters of Poland's consumption comes from the Belarusian spur of the pipeline. Reuters said oil was still flowing westwards via the pipeline but that Belarus has threatened to increase the transit fee it charges Russia to ship its oil in retaliation for cutting off its own supplies.

Gas imports are more easily disrupted than oil because most gas is still supplied through fixed pipelines which can be turned on or off, whereas oil can be shipped by tanker from all over the world. This latest dispute with Belarus is unlikely to result in European countries going short of oil as they will be able to buy in supplies from elsewhere, albeit at a higher price.

Last week, the Ukraine and Russia agreed new terms on the transit of oil to Europe for 2010, averting fears of a dispute after Vladimir Putin, the Russian prime minister, accused its neighbour of "abuse" on the deal. Energy watchers say there is unlikely to be a repeat of last year's dispute over gas between the two countries this time round, partly because the International Monetary Programme has changed the conditions of its loan programme to make it easier for Ukraine to pay for its gas supplies.

Belarus argues that Moscow's demand for a higher tax on the bulk of Russian oil shipment contradicts an agreement signed late last year. Experts estimate that the tax would cost Belarus $5bn (?3bn) this year, 10% of its gross domestic product.

Source:

http://www.guardian.co.uk/business/2010/jan/03/russia-suspends-belarus-energy-supplies


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