Russia-Belarus Oil Dispute Threatens Europe’s Supply

By Andrew E. Kramer

Russia and Belarus have failed to renew an agreement on crude oil export tariffs that expired on New Year’s Eve, raising the prospect that yet another otherwise unremarkable energy pricing dispute between Russia and a neighbor could unravel into a midwinter fuel shut-off on the Continent.

Just a year ago, Europeans shivered through a politically tinged dispute that went on for weeks between Russia and Ukraine over natural gas prices and transit fees.

This year, the crude oil pipeline that is the focus of disagreement is integral to exports of Siberian petroleum to Western Europe as part of the Soviet-era Druzhba pipeline system.

As is the case with natural gas pipelines in Ukraine, about 1.3 million barrels of oil per day shipped along the Belarussian spur of the Druzhba pipeline supply both the internal market in Belarus and the more lucrative markets in the European Union, like Germany and Poland.

On Sunday, Reuters cited two oil traders as saying that Russia had begun curbing supplies to the domestic market by cutting the flows to two refineries, Naftan and Mozyr. In Ukraine last January, that was a first step toward a more general shutdown.

Russian officials took pains to emphasize that the export volumes would continue to flow, while either refusing to confirm or denying the report of a local shut-off in Belarus.

A Russian Ministry of Energy spokeswoman, Irina F. Yesipova, said the transit flow en route to Western markets, a supply big enough that its disruption could raise global oil prices, had not been and would not be halted. She declined to comment on the domestic supplies in Belarus.

A senior official at Transneft, Russia’s state oil transport company, said in a telephone interview that the company continued to supply both the internal Belarussian market and export markets at full volume.

“We have not stopped pumping, not to Belarus, not for export,” said the official, who was not authorized to speak publicly.

A duty officer at the Belarussian Foreign Ministry referred questions to the Ministry of Energy, whose phones were not answered on Sunday.

Belarus is one-half of a loose confederation with Russia that was supposed to eventually lead to a common currency and customs zone. Yet in the oil business, so vital to Russia’s economy, Belarus was treated with privilege but as less than a fully integrated partner.

Refineries in Belarus paid a fraction — 35.6 percent — of Russia’s standard crude oil export tariff. The Belarussians, though, were able to re-export the gasoline, diesel, bitumen and other products to Europe at a healthy profit. This trade helped prop up the government of Aleksandr G. Lukashenko, the Belarussian president, at Russia’s expense.

The oil agreement with Moscow expired Dec. 31. Russia’s deputy prime minister for energy, Igor I. Sechin, had said that lacking a new deal, Belarus should pay the full export tariff on Russian crude, the Russian state RIA news agency reported.

Belarussian officials responded that their country should pay no tariff because it had renewed its commitment to a customs union with Russia just last year, according to a statement posted on the government’s Web site.

Before the New Year, the Belarussian delegation left Moscow, and the government in Belarus posted a statement saying that they had been subjected to “unprecedented pressure” to acquiesce to Russia’s demands. Both sides, however, said Sunday that negotiations were continuing.

Last January, the Russian natural gas monopoly Gazprom first tried to halt supplies to Ukraine’s domestic market in a pricing dispute. It then shut down the pipeline entirely, accusing the Ukrainians of continuing to supply their own needs by siphoning gas intended for export.
The New York Times