Belarus, Russia seek to end oil dispute

Belarus, Russia seek to end oil dispute

Russia and Belarus sought Tuesday to resolve a damaging trade battle that has led Moscow to halt oil supplies to several EU nations via Belarus, causing fresh alarm in Western Europe over its reliance on Russian energy.

A delegation led by Vice-Premier Andrei Kobyakov flew to Moscow on Tuesday to find a solution to the halt of the transit of oil through Belarus, which has affected Ukraine, Germany, Poland, Hungary, the Czech Republic and Slovakia.

Russia on Monday stopped pumping oil to Europe via the Druzhba, or Friendship, pipeline that crosses Belarus, accusing its neighbor of siphoning off oil.

The two former Soviet nations are locked in a dispute over a Russian decision to impose hefty duties on oil exports to Belarus. Once close allies, relations have grown increasingly tense amid impatience in Moscow at subsidizing the economy of Belarus’ isolated regime through cheap energy.

The Paris-based International Energy Agency urged both sides Tuesday to reach “a quick and clear resolution to the disruption,” although it said the stoppage did not threaten supplies immediately since EU refineries maintain strategic oil stocks.

European Union a day earlier called for a rapid resumption of oil deliveries and EU energy chief Andris Piebalgs said that he could convene a meeting later in the week of the bloc’s Oil Supply Group to evaluate the situation.

The disruption of Russian oil exports to Europe once again highlighted concerns about the reliability of Russia as an energy supplier, a year after its pricing dispute with Ukraine led to brief shortages of Russian natural gas pumped to several EU nations.

Russia currently supplies a quarter of the EU’s oil and over two-fifths of its gas consumption.

German Chancellor Angela Merkel said Tuesday that Germany must find ways to cut its dependence on a single source of oil and gas, from conservation to renewable energy and a fresh look at nuclear power.

Merkel noted that Russia ”” as the Soviet Union ”” reliably supplied West Germany with gas during the Cold War, so that “it’s right to enter into a relationship with Russia.”

“But it’s also smart not to be one-sidedly dependent on one supplier,” she said in an interview for broadcast Tuesday on ARD public television.

Poland relies on the pipeline for around 96 percent of its oil consumption. Russia is Germany’s top supplier of oil, supplying roughly a third of its imports. About two-thirds of Russian oil for German consumers comes through the Druzhba pipeline.

The 2,500-mile-long pipeline pumps an average of 1.2 million barrels a day to eastern and central Europe. The pipeline has two branches, one of which runs to Poland and Germany, the other to Ukraine, Hungary, Slovakia and the Czech Republic.

The dispute came just days after Belarus and Russia reached a last-ditch agreement on gas prices that avoided a New Year’s cutoff of natural gas for Belarusian consumers and potential supply shortages in Western Europe.

Belarus grudgingly accepted a doubling of the price it pays for imports of Russian natural gas, on which it depends for industry and home heating.

But the two countries are now in conflict over oil duties, with Russia determined to stop Belarus from re-exporting petroleum products made from processing Russian oil bought cheaply under the previous duty-free regime.

Russia and Belarus have been close allies, with Moscow relying on Minsk as a military buffer between it and
NATO. In the mid-1990s they signed a loose union treaty.

But analysts say the Kremlin has distanced itself from authoritarian leader Alexander Lukashenko since he refused a proposal to incorporate Belarus into Russia. The inefficient, Soviet-style state-dominated economy in Belarus and Lukashenko’s popularity have depended heavily on subsidized Russian energy.

Last week, Belarus announced it would charge an import duty of $45 per metric ton of Russian oil shipped to Western Europe in pipelines that cross Belarus. The move followed Russia’s imposition of an export duty of $180 a ton on oil sold to Belarus.

Russia’s Deputy Trade and Economic Development Minister Andrei Sharonov said Monday that Moscow would insist on Belarus canceling the import duty.

Natalia Leshchenko, an analyst with Global Insight, said that Belarus had a strong bargaining position as it was unworried at the consequences of the cutoff to Russian oil exports because it was already treated as a pariah in the West.

“Given the urgency of the matter, the dispute is likely to be resolved soon, and most likely at the expense of Russia,” she said. “Transneft (the Russian state pipeline operator) and the Russian government are looking to face financial losses and damaged reputation, whereas the outcast status of Belarus in Europe gives it the benefit of invulnerability, which its government uses in full.”

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