Russia-Belarus energy dispute

The Russia-Belarus energy dispute began when Russian state-owned gas supplier Gazprom demanded an increase in gas prices paid by Belarus, a country which has been closely allied with Moscow and forms a loose union state with Russia. It escalated on January 8, 2007, when the Russian state-owned pipeline company Transneft stopped pumping oil into the Druzhba pipeline which runs through Belarus because Belarus was siphoning the oil off the pipe without mutual agreement. [cite news
url=http://news.bbc.co.uk/1/hi/business/6240473.stm
title=Russia oil row hits Europe supply
publisher=BBC
date=2007-01-08
accessdate=2007-01-09] cite news
url=http://www.upstreamonline.com/live/europe/article125800.ece
title=Russian oil flows via Belarus halted
publisher=Upstreamonline
date=2007-01-08
accessdate=2007-01-09] On January 10, Transneft resumed oil exports through the pipeline after Belarus ended the tariff that sparked the shutdown, despite differing messages from the parties on the state of negotiations. [cite news
url=http://www.globalinsight.com/SDA/SDADetail8016.htm
title=Belarus Cancels Oil Transit Tax; Druzhba Oil Deliveries Resumed
publisher=Global Insight
date=2007-01-11
accessdate=2007-01-01] [cite news
url=http://www.washingtonpost.com/wp-dyn/content/article/2007/01/10/AR2007011002094.html
title=Russia-Belarus Standoff Over Oil Ends, Clearing Way for Accord
publisher=Washington Post
date=2007-01-11
accessdate=2007-01-11]

The Druzhba pipeline, the world's longest, supplies around 20% of Germany's oil. [cite news
url=http://www.upstreamonline.com/live/article125765.ece
title=Belarus steps back from brink
publisher=Upstreamonline
date=2007-01-05
accessdate=2007-01-09] It also supplies oil to Poland, Ukraine, Slovakia, the Czech Republic, and Hungary.

Background

For the long period, the gas price for the most of former USSR republics was significantly lower than for the Western European countries. In 2006 Belarus paid only $46 per 1000 m³, a fraction compared to $290 per 1000 m³ paid by Germany. [cite news |url=http://english.people.com.cn/200604/17/eng20060417_258874.html |title=Russia to adopt market gas price with Belarus from 2007 |publisher=People's Daily |date=2006-04-17 |accessdate=2007-05-19] The annual Russian subsidies to the Belarusian economy were around $4 billion, as Russian president Vladimir Putin said on January 9, 2007. In 2006 Russia announced a higher price for 2007. After Alexander Lukashenko, President of Belarus, rejected this price change, and without a new treaty, Gazprom threatened to cut gas supplies to Belarus from 10:00 MSK on January 1, 2007. Both sides finally agreed on the following terms:
*Russian gas to be sold to Belarus for $100 per 1000 m³ (compared to Gazprom's original request of $200 per 1000 m³)
*Belarus to sell Gazprom 50% of its national gas supplier Beltransgaz for the maximal price of $2.5 billion [cite news |url=http://news.bbc.co.uk/2/hi/business/6189379.stm |title=Russian gas demands irk Belarus |publisher=BBC |date=2006-12-18 |accessdate=2007-01-09]
*Gas prices for Belarus to gradually rise to the European market price by 2011
*Belarus's transit fees for Russian gas to increase by around 70% [cite news |url=http://news.bbc.co.uk/1/hi/world/europe/6221835.stm |title=Russia-Belarus gas deal reached |publisher=BBC |date=2006-12-31 |accessdate=2007-01-09]

Another part of the energy dispute is the dispute for oil. In 1995, Russia and Belarus agreed that Russia would not impose any customs on oil exported to Belarus. In exchange, the revenues from this oil processed in Belarus would be shared by 15% for Belarus and 85% for Russia. In 2001, Belarus unilaterally canceled this agreement while Russia continued its duty-free exports. Lukashenko's state kept all the revenues, and many Russian oil companies moved their processing capacities to Belarus. On this arrangement, Russia also lost billions of dollars annually. On December 18, 2006, Russia put an end to this practice, announcing a standard $180 per ton toll on Russian export oil to Belarus.Fact|date=February 2007 In response, Belarus imposed a tariff of US$45 per ton of oil flowing through the Druzhba pipeline, prompting Russia to claim that the move was illegal and to threaten retaliation, [cite news |url=http://news.yahoo.com/s/afp/20070106/bs_afp/belarusrussiaenergy |title=Belarus, Russia trade blows in oil tax dispute |publisher=Agence France-Presse |date=2007-01-06 |accessdate=2007-01-09] since it contradicts bilateral trade agreements and worldwide practice. Only imported or exported goods are being tariffed while transit goods are not objects of tariffing. Russia rejected paying the newly imposed Belarusian tariffs.cite web |title=Russia oil row hits Europe supply |url=http://news.bbc.co.uk/2/hi/business/6240473.stm |publisher="BBC" |accessdate=2007-01-10 |date=2007-01-08]

In compensation, Belarus began siphoning off oil from the pipeline. According to Semyon Vainshtok, the head of Russia's pipeline monopoly Transneft, Belarus had siphoned off 79,900 metric tons of oil since January 6. Vainshtok said this was illegal and the move was made "without warning anyone."cite news
author=Steven Lee Myers
url=http://www.iht.com/articles/2007/01/08/business/belarus.php
title=Belarus and Russia spar over crude oil cutoff
publisher=Herald Tribune
date=2007-01-08
accessdate=2007-01-09] In response, Russia stopped oil transport on January 8.cite web| title=Белoруссия отменила транзитную пошлину |url=http://news.bbc.co.uk/hi/russian/russia/newsid_6248000/6248293.stm |publisher="BBC" |accessdate=2007-01-10 |date=2007-01-10 |language=Russian]

A Belarusian team led by Vice-Premier Andrei Kobyakov flew to Moscow on 9 January to pursue a solution [ cite news
url=http://www.theglobeandmail.com/servlet/story/RTGAM.20070109.wbelaruss0109/BNStory/International/home
title=Russian oil flows via Belarus halted
publisher=globeandmail.com
date=2007-01-09
accessdate=2007-01-09] but initially reported that they had not been able to start negotiations. [ cite news
url=http://hosted.ap.org/dynamic/stories/R/RUSSIA_BELARUS_OIL
title=Russia Cabinet Told to Weigh Output Cut
publisher=Associated Press
date=2007-01-09
accessdate=2007-01-09]

On January 10, the Belarusian government lifted the tariff, and Russia agreed to start negotiations. [cite web| title=Russia says oil flow to restart |url=http://news.bbc.co.uk/2/hi/business/6248251.stm |publisher="BBC" |accessdate=2007-01-10 |date=2006-01-10] The oil flow was resumed at 05:30 GMT on January 11. [cite web |title=Russia-Belarus oil blockade ends |url=http://news.bbc.co.uk/2/hi/business/6248251.stm |publisher="BBC" |accessdate=2007-01-11 |date=2007-01-11] In the wake of the dispute, Gazprom acquired 50% stake in the Belarusian gas pipeline operator Beltransgaz for 2.5 Billion USD. [cite web| title=Gazprom Buys Half of Beltransgaz for $2.5 Billion |url=http://www.kommersant.com/p-10746/natural_gas/ |publisher="Kommersant" |accessdate=2007-05-19 |date=2007-05-19]

August 2007 developments

Following the alleged violation of previous agreements and the failure of negotiations, on August 1, 2007 Gazprom announced that it would cut gas supplies to Belarus by 45% from August 3 over a $456 million debt. [http://www.reuters.com/article/companyNewsAndPR/idUSL019104720070801, Gazprom to halve gas to Belarus in debt row] "Reuters", published 2007-08-01, accessed 2007-08-01] Talks are continuing and Belarus has asked for more time to pay. Although the revived dispute is not expected to hit supplies to Europe, the European Commission is said to view the situation 'very seriously'.

Following overnight negotiations in Moscow, on August 3, $190 million of the debt was repaid, and Belarus was given a further to week to pay the remainder or face a 30% cut in supplies. [ [http://www.reuters.com/article/companyNewsAndPR/idUSL0347959120070803 Belarus buys one week's respite in Russia gas row] , "Reuters", published 2007-08-03, accessed 2007-08-03]

As of August 8th Belarus has fully paid its $460 million debt for Russian natural gas supplies, ending a dispute between the country and Gazprom [RTS: GAZP] .

Related disputes

The situation is reminiscent of other recent price tensions between Russia, one of the world's energy superpowers, and other states since the start of 2005. These have resulted in increases in the prices paid for gas by Moldova (now paying US$170 per 1,000 cubic meter [ [http://www.akm.ru/eng/news/2006/december/26/ns1840485.htm Gazprom to deliver gas to Moldavia at $170 per 1,000 cubic meters in 2007] , by AK&M, 26 December 2006. Retrieved on 11 January 2007] ), Georgia (US$235 per 1,000 cubic meter [cite news
url=http://news.bbc.co.uk/1/hi/business/6203721.stm
title=Georgia 'agrees Russia gas bill'
publisher=BBC
date=2006-12-22
accessdate=2007-01-09] ) and Ukraine (following the 2006 Russia-Ukraine gas dispute, which also resulted in a 4 day cut to European gas supplies).

Impact

All IEA member countries, who are net oil importers, have legal obligation to hold emergency oil reserves, which is equivalent to at least 90 days of net oil imports of the previous year. [ [http://www.iea.org/textbase/papers/2004/factsheetcover.pdf Fact Sheet on IEA Oil Stocks and Response Potential] ] Furthermore, under the EU regulations there is obligation to hold reserves equivalent to 90 days of consumption, so unlike the gas dispute with Ukraine in 2006, consumers were not affected. Poland had an 80-day oil reserve. The Czech Republic reported drawing oil from its 100 day reserves. [cite news
url=http://www.globalinsight.com/SDA/SDADetail8001.htm
title=European Leaders Fire Up Over Russian Oil Cut
publisher=Global Insight
date=2007-01-10
accessdate=2007-01-10] Had the dispute prolonged, it is likely that alternative supplies would have been secured. International oil prices were not significantly affected.

The involved countries have, however, expressed concerns about the reliability of the Russia-Belarus oil pipeline and Belarus as an oil middleman supplier.

The events have also provoked renewed discussion on the government policy of phasing out nuclear power in Germany. [cite news
url=http://www.dw-world.de/dw/article/0,2144,2304599,00.html
title=Merkel Puts Germany's Nuclear Phase-Out in Question
publisher=Deutsche Welle
date=2007-01-09
accessdate=2007-01-11]

Reaction

The European Union has demanded an "urgent and detailed" explanation, according to a spokesman for Energy Commissioner Andris Piebalgs.

Piotr Naimski, Poland's deputy economics minister who is responsible for energy security, stated "This shows once again that arguments among various countries of the former Soviet Union between suppliers and transit countries mean that these deliveries are unreliable from our perspective."

German Economy Minister Michael Glos stated that the dispute showed that "one-side dependencies must not be allowed to develop." [cite news
author=Sebastian Smith
url=http://news.yahoo.com/s/afp/20070108/bs_afp/polandrussiabelarus_070108212931
title=Russia-Belarus oil row hits supplies to Germany, Poland
publisher=Agence France-Presse
date=2007-01-08
accessdate=2007-01-09]

Following a meeting with European Commission President José Manuel Barroso in Berlin, German Chancellor Angela Merkel condemned the action, stating "It is not acceptable when there are no consultations about such actions". Commenting on the importance of trust in energy security, she said "That always destroys trust and no trusting, undisturbed cooperation can be built on that." Merkel continued by saying "We will certainly say to our Russian partners but also to Belarus that such consultations are the minimum when there are problems, and I think that that must become normality, as it would be within the European Union." Barroso said that "while there is no immediate risk to supplies, it is not acceptable" for such actions to be undertaken without prior consultation. [cite news
url=http://www.iht.com/articles/ap/2007/01/09/europe/EU-GEN-Germany-EU-Energy.php
title=Merkel, Barroso say 'not acceptable' to halt energy deliveries without consultations
publisher=Associated Press
date=2007-01-09
accessdate=2007-01-09]

ee also

*Russia-Ukraine gas dispute
*Energy crisis
*Nord Stream, an upcoming pipeline aimed at bypassing transit countries. [cite news
url=http://www.mosnews.com/money/2005/12/30/iaeagainstpipeline.shtml
title=International Energy Agency Speaks Out Against Russia’s Baltic Gas Pipeline
publisher=MosNews
date=2005-12-30
accessdate=2007-01-09]
*Energy Charter Treaty, including principles for energy trade and transit which Russia is refusing to ratify.
*Energy policy of Russia
*Energy policy of the European Union

References

External links

* [http://www.transneft.ru/Default.asp?LANG=EN Transneft] , Russian state owned pipeline monopoly.
* [http://www.btg.by Beltransgaz] , Belarusian gas pipeline company.