This Could Be Bad News
January 8th 2007 23:57
Russia's Deputy Trade and Economic Development Minister Andrei Sharonov said that Moscow had been forced to suspend oil exports via the Druzhba, or Friendship, pipeline after disruptions he blamed on Minsk. "We view this situation as force majeure," he said in an interview with Russian news channel Vesti, according to the ITAR-Tass news agency.
The Druzhba pipeline, coming from Russia and into Belarus, later splits into two spurs with the bigger one, the northern leg, going to Poland and to Germany. The northern leg pumps crude to refineries in Poland and Germany and for re-exports from the Polish Baltic Sea port of Gdansk. The pipeline's southern leg travels across Ukraine to Hungary, Slovakia and the Czech Republic.
Russia's pipeline monopoly Transneft said on Monday it was forced to act because Minsk had been siphoning off oil illegally from the Druzhba ('Friendship') pipeline system. It is unclear whether the Russians stopped the oil or Belarus cut off the pipeline. The truth is somewhere in the middle:
Transneft Vice-President Sergei Grigoryev told Reuters: "The Belarussian side began taking transit oil as payment in kind for a new duty it had illegally imposed." "We therefore reduced transit supplies, equal to the amount being taken. We then reached the point where we had to stop supplies completely."
Ending a little more than a week ago in a near total Russian victory, a deal forced on Lukashenko's government doubled the price of natural gas sold to Belarus, and transferred control of Belarus' natural gas pipeline network to the Russian company Gazprom. The modern Russian position was, and remains: "The Belarusians should pay full price, just like everyone else."
Then, without warning, Belarus as of the New Year imposed a 45 dollar "surcharge" fee for every ton of Russian oil crossing Belarus, in excess of previously- agree-upon transit rates.
"They want to charge us full price, fine," Lukashenko said. "Then we will charge them." "I have always said that our 'the strategic trump' of Belarus is our location," he said. "If we have to take advantage of it, we will."
A a week later, early on Monday morning, the Belarusians shut off the Druzhba oil line entirely, effectively holding one of Russian government's largest income streams hostage, and drawing to ignored little Belarus the undivided attention of energy ministers from the Adriatic to the Baltic, reports DPA.
Russian Deputy Economy Minister Andrei Sharonov said he saw little chance of a de-escalation. "It looks like we are heading into a trade war," he told Ekho Moskvy radio.
"This has not caused any acute threats to our energy supply. But there have been transit problems again and again over the past few years," German Chancellor Merkel said in a German television interview. "We need legal protection, we need contract security."
European oil markets rose, with Brent crude futures gaining by $1.08 to $56.71 per barrel in London. But oil traders appeared relaxed, for now at least, given ample oil in storage. "It's a bit of a shock right now, but the market is not responding that fast; we've got used to this kind of thing," one fuel oil trader said, according to Reuters.
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