BELARUS NEWS AND ANALYSIS

DATE:

24/01/2011

Time is running out in Belarus-Russia oil spat

MOSCOW, Jan 24 (Reuters) - Belarus refineries have only one week's worth of oil stocks left as a row with Moscow over pricing, which has unsettled European traders, has left the country without inflows of Russian oil since Jan. 1.

The depth of the row was highlighted last week when a meeting between Russian Prime Minister Vladimir Putin and his Belarussian counterpart yielded no tangible results despite a recent thaw in relations between Moscow and Minsk.

The Kremlin silently approved last month's presidential elections in Belarus, deemed "rigged" by Western observers and won by longstanding President Alexander Lukashenko.

But talks over Russian oil prices -- as Moscow dropped export duties for Belarus-bound oil after creation of a free-trade zone -- remain deadlocked.

Representatives of Belarussian oil refineries have warned they only have enough oil stocks to last until the end of the month.

Russian oil pipeline monopoly Transneft (TRNF_p.MM: Quote) has already diverted some crude to sea ports from Belarus. [ID:nLDE70K06D]

According to Transneft's documents, Russian oil continues to flow to Europe via the Druzhba (Friendship) pipeline through Belarus at a rate of about 800,000 barrels per day, market sources told Reuters on Monday.

Russian firms want a $45 per tonne price rise as Belarus will increase transit tariffs by 12.5 percent from Feb. 1 and crude oil prices on world markets have hit two-year highs. Minsk has said the move would sink the plants into the red.

Minsk also balks at the idea of a Russian gas price rise, another bone of contention between the two Slavic neighbours.

Two Belarus refineries, Mozyr and Polotsk (Naftan), are a key source of income for the local economy, which is coming out of the woods after a crisis-hit 2009.

The plants usually operate at a daily capacity of 360,000 barrels but, according to market sources, have slashed production, resulting in a diesel export suspension to Europe.

An alternative source to Russian crude is Venezuelan oil, which Belarus is expected to ship in this month at a rate of 38,000 barrels per day -- not enough to sustain the refineries' normal working process.

(Reporting by Vladimir Soldatkin, Gleb Gorodyankin in Moscow; writing by Vladimir Soldatkin; Editing by Jason Neely)

Source:

http://af.reuters.com/article/energyOilNews/idAFLDE70N05L20110124




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