BELARUS NEWS AND ANALYSIS

DATE:

06/01/2010

Russia-Belarus oil row heats up

Prime Minister Vladimir Putin has indicated Moscow is unlikely to cede ground on the oil tax. Photo / AP

MINSK - An energy price dispute between Russia and Belarus has escalated with the Belarusian state power company threatening to cut off electricity to Russia's westernmost region if Moscow insists on being paid a new oil tax.

Russia was still shipping oil to Belarus and through the country to Europe, officials said yesterday, allaying fears of a repeat of last year's gas cutoff through Ukraine, and Russia's Prime Minister, Vladimir Putin, voiced hopes for a quick deal.

However, Putin stressed that a solution must be based on the Russian law - a signal Moscow would be unlikely to cede any ground on its claims.

Russia had said earlier that it was ready to provide tax-free oil for Belarus' internal consumption, in line with an existing deal, but would impose a 100 per cent tax on all the oil Belarus processes for exports to the West. That is three times the current tax.

Belarus buys about 20 million tonnes of Russian crude a year, but consumes only about a quarter of that. The rest is refined and exported to the West, accounting for more than a third of Belarus' export revenues.

Belarusian experts have estimated that the Russian oil tax hike would cost Belarus about US$5 billion ($6.8 billion) this year, or more than 10 per cent of its gross domestic product.

Belarus' state power company, Belenergo, warned Moscow yesterday that it could retaliate by interrupting electricity transfers to Russia's westernmost Kaliningrad region. The Baltic region is sandwiched between Poland and Lithuania, which both border Belarus.

Putin has discussed the issue with his energy pointman, Igor Sechin, who reported that Russia began pumping oil to Belarusian refineries on Monday and that Russian crude supplies bound for Europe through Belarus had continued uninterrupted.

Marina Kostyuchenko, a spokeswoman for the Belarusian state-controlled oil company Belneftekhim, confirmed that processing plants were still running and receiving Russian oil.

"The amount of supplies is sufficient for their normal operation," she said without elaborating.

She declined to say whether Belarusian refineries had stockpiled oil in case of supply interruptions, but some experts estimated such stockpiles could last for about 10 days.

Belarus said yesterday that it was ready to continue talks with Russia and confirmed that the transit of Russian oil to customers in Europe through Belarus had not been affected - easing fears of a repeat of last year's cutoff in Russian gas shipments to Europe because of a similar price dispute with Ukraine.

In Moscow, Mikhail Barkov, vice-president of the state-controlled Transneft company that runs Russian oil pipelines, also said price arguments with Belarus would not affect Russian oil exports to the West, RIA Novosti news agency reported.

Belarus said on Monday that Moscow's demand that it should pay a higher tax on the bulk of Russian oil shipments contradicted an agreement on customs union signed late last year.

Russia is the main ally and sponsor of Belarus, but relations have been increasingly strained by financial arguments. Belarusian President Alexander Lukashenko has accused the Kremlin of trying to subdue his country of 10 million people and to acquire key industrial assets.

- AP

Source:

http://www.nzherald.co.nz/business/news/article.cfm?c_id=3&objectid=10618543


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