Russian oil flowing to EU despite Belarus dispute

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Russia said it had resumed flows of crude to refineries in Belarus but it did not clinch a deal to resolve a tense price dispute with Minsk, which had raised fears that oil supplies to European Union countries might be blocked. The Russian press reported that Minsk is threatening to cut electricity supply to the Kalingrad enlave.

Russia’s foremost energy official, Igor Sechin, told Prime Minister Vladimir Putin on 4 January their country had restarted supplying refineries in neighbouring ex-Soviet Belarus on 3 January, but there were still “no signed agreements” with Minsk. 

In a transcript of the Moscow meeting, published on the government website, Putin told Deputy Prime Minister Sechin he hoped an agreement over oil deliveries to Belarus for 2010 and beyond would be reached “sometime soon”. 

Moscow had halted oil supplies to Belarussian refineries after failing to agree terms for this year. 

“Russia has handed over its proposals to our Belarussian partners. We are in constant contact with them,” Sechin said. 

Minsk earlier on Monday warned it may cut electricity supplies to Russia, ratcheting up tensions in the dispute that broke out on New Year’s Eve. 

The spat has raised the spectre of another winter of supply disruptions for EU customers such as Germany, which buys 15% of its oil from the arm of the Druzhba pipeline that goes to Europe through Belarus. 

Sechin on Monday said European customers were unaffected by the dispute, and a spokeswoman for Belarus state oil company Belneftekhim said Russian crude was flowing normally through the Druzhba pipeline. She said refineries were working normally. 

But Belarus’s state power company said the lack of a proper agreement governing electricity supply meant it might have to be cut to the Russian enclave of Kaliningrad on the Baltic Sea. 

“The Belarussian side will be forced to stop the unsanctioned commercial transit of electricity across the Belarussian grid which could threaten supplies to customers in Kaliningrad,” a unit of Belenergo said in a statement. 

The dispute and cold weather caused oil prices to rise to their highest for more than two months on Monday, hitting $81 a barrel. 

Russia, the world’s largest oil and gas producer, has repeatedly clashed with its neighbours, particularly Ukraine, over Soviet-style subsidised energy prices, though several winters of supply disruptions have also strained ties with the European Union, Moscow’s biggest trading partner. 

Now the focus has shifted to Belarus, which is in dispute with Moscow over how much export duty it should pay to Russia for supplies which are then refined and exported to the West, a pillar of the $50 billion Belarussian economy. 

Russia wants Belarus to pay tax on oil supplies that it does not consume domestically. Of the 20 million tonnes of crude (400,000 bpd) that Belarus receives annually from Russia, six million tonnes (120,000 bpd) are used domestically. 

The rest is refined by Naftan and Mozyr refineries in Belarus for re-export to the West. Only a small portion of refined products actually stay within Belarus. 

Minsk wants all 20 million tonnes received annually at a discounted export duty, as it had before 1 January this year. 

(EURACTIV with Reuters)

The Belarus authorities are blackmailing Russia by threatening to cut electricity supply to the Russian enclave of Kalingrad, in case Moscow decides to stop oil supplies, the Russian daily Vzglyad writes today (5 January).

Boris Zverev, an official from the Russian electricity monopoly "INTER RAO" is quoted saying:

"The Belarus side is in fact starting to blackmail Russia through its media with threats to cause damage to the electric supplies of the Kaliningrad region. We are of the view that the use of media as an instrument of pressure has nothing to do with the normal rules of conducting negotiations. We hope that it will be possible to come back to discussing the problem in a civilised environment."

Concern over EU energy supplies in the run up to New Year - the traditional end of energy contracts across the former Soviet Union - had focused on Ukraine, through which Russia pumps one fifth of the European Union's gas supplies. 

But a repeat of last year's almost fortnight-long gas supply disruption was avoided when the International Monetary Fund (IMF) relaxed conditions in December for a multi-billion dollar bailout to Ukraine, allowing Kiev to pay its gas bill. 

In 2008, Germany received around 350,000 barrels per day (bpd) of crude via Druzhba, just under 15% of its total consumption. Refineries belonging to Total, Shell and BP are among the biggest buyers of crude from Druzhba. 

Poland imports around 400,000 bpd of crude via Druzhba for domestic refining, or more than three-quarters of its consumption, and exports another 90,000 bpd of Druzhba crude via the Baltic Sea port of Gdansk. 

Politicians in the European Union and the United States have repeatedly accused Russia of using its vast energy resources to bring its neighbours to heel, though Moscow says it is simply trying to bring market pricing for its energy supplies. 

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