Russia builds Baltic oil pipeline to bypass Belarus

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Russia started building a $4 billion oil pipeline on 10 June to cut Belarus from a key supply route to Europe, as tensions grow between the ex-Soviet allies over warming ties between Minsk and the European Union.

The new pipeline, which will skirt Belarus on its 1,000-km route to the Baltic, was first mooted after a transit dispute in 2006 and will tighten Kremlin control over energy supply routes, also giving it the option to divert flows from Ukraine. 

“It’s a very significant loss for Belarus, not only in economic terms but politically, as the country is losing its reputation as a reliable transit nation,” Yaroslav Romanchuk, head of the Mizes think-tank in Belarus, said. 

Russia, the world’s second-largest oil exporter, is keen to bypass the countries that stand between its abundant oil and gas reserves and customers in Europe after arguing with both Ukraine and Belarus over transit conditions in recent years. The Baltic Pipeline System extension will carry 30 million tonnes a year, or 6% of Russia’s output last year, to Ust-Luga port on the Baltic Sea. The route, known as BTS-2, is scheduled for completion in the third quarter of 2012. 

Construction begins only weeks after Russia shelved a $500 million loan to ease Belarus through the financial slowdown, saying it was unhappy with the economic policies of Belarussian President Alexander Lukashenko. 

With Minsk caught in a struggle for influence between Russia and the European Union, Moscow dealt a further blow to its neighbour’s $1 billion dairy export business by banning almost all milk products in a market where it had a 4% share. 

Flexibility of supply 

Russia’s foremost energy official, Igor Sechin, said BTS-2 would afford Moscow the flexibility to re-route oil either from the Druzhba pipeline through Belarus or the Odessa-Brody route that carries Russian oil south to Ukrainian Black Sea ports. 

Ukraine has said it might reverse flows through Odessa-Brody to deliver Caspian Sea region oil to Europe. 

“Construction of BTS-2 allows for the lowering of risks in the event that flows through Odessa-Brody are reversed,” Sechin, an influential deputy to Prime Minister Vladimir Putin, said at a ceremony to mark the start of construction. 

He said talks were under way with Ukraine on the use of this pipeline, and also with Kazakhstan on supply of additional crude that could travel through the BTS-2 route. BTS-2 will cost between 120 billion and 130 billion roubles ($3.8 billion-$4.2 billion) to construct. The pipeline starts in Bryansk region, about 400 km (250 miles) southwest of Moscow, and its capacity could eventually rise to 50 million tonnes. 

A 172-km (108-mile) link to the Kirishi refinery in northwest Russia, owned by Surgutneftegaz, will join the pipeline’s first stage. 

(EURACTIV with Reuters.) 

The BPS-2 project emerged during an oil dispute between Russia and Belarus in January 2007, when Russia cut off supplies to Europe for four days via the Druzhba pipeline after Belarus refused to let Russian oil pass through the country without payment of a transit duty. 

Transneft-built BPS-2 runs from the Unecha junction of the Druzhba pipeline near the Russia-Belarus border to the Ust-Luga terminal, near the Luga river's entry into the Gulf of Finland. 

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