BELARUS NEWS AND ANALYSIS

DATE:

04/01/2010

Russia stops oil shipments to Belarus

By Charles Clover

Russia has stopped shipments of oil to Belarus following a dispute about pricing, oil traders said on Sunday.

The move will set off alarm bells in Europe, triggering memories of last January's natural gas war between Russia and Ukraine that left several eastern European cities without gas for days. Oil, however, is more fungible than gas, and easily made up with alternative suppliers, so the consequences of the dispute are unlikely to be as severe.

The cut-off is the first since January 2007, when Russia stopped pumping oil to Belarus for three days following a similar tariff battle, which was eventually resolved in Russia's favour.

Despite the action, oil exports to Europe were still flowing and refineries in Belarus had a week's worth of oil stockpiled, Reuters reported.

Irina Yesipova, of Moscow's energy ministry, told Russian news agency RIA Novosti on Sunday that oil transit flows to Europe were unaffected by the dispute: "Transportation is being carried out in full measure and the negotiation process is continuing right now," she said, without giving details.

Julia Nanay, of the Washington-based Petroleum Finance Company, said the pipeline via Belarus supplied up to 800,000 barrels a day of oil products to Germany and Poland. "If this delivery were cut it would be serious. However, the crude continues to transit Belarus for now and Germany and Poland are receiving oil," she said.

Russia has long wanted to tax oil exported to Belarus. For years Belarus has made a business of importing oil for its own refineries without having to pay Russia's export tax, and then selling on surplus refined products to Europe at a much cheaper rate than that charged by Russian companies.

The cut-off follows the failure of negotiations between Minsk and Moscow in the closing days of last year on new tariff arrangements for transit of Russian oil onward to Europe.

On January 1 a spokesman for the Belarus government told Interfax news agency that "unprecedented pressure" had been put on their delegation during the negotiations. Minsk called on Russia to continue supplies to Belarus under the old terms, until a new agreement could be reached.

It warned that Russian demands would violate a customs union agreement signed last year by Belarus, Russia and Kazakhstan, and "would undermine all agreements reached on the further integration of our states".

The dispute is likely to present an?obstacle to closer ties between the two countries. Belarus is virtually Russia's only ally among former Soviet republics.

Moscow and Minsk signed a series of treaties aimed at unifying their countries in the 1990s, though these have failed to be realised amid friction between the Kremlin and President Alexander Lukashenko of Belarus. Likewise, the customs union agreement remains largely on paper.

Maksim Blant, an economic analyst, told the Ekho Moskvi radio station that the disagreement was over how to apply the newly signed customs union agreement to oil, with Belarus arguing that it should be collecting customs duties on behalf of Russia.

Additional reporting by Reuters

Source:

http://www.ft.com/cms/s/0/45e87598-f863-11de-beb8-00144feab49a.html


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