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Thread: ROAR: Russia-Belarus oil dispute puts Customs Union to the test

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    Default ROAR: Russia-Belarus oil dispute puts Customs Union to the test

    ROAR: Russia-Belarus oil dispute puts Customs Union to the test
    Published 05 January, 2010, 16:29

    Moscow and Minsk are continuing talks about Russia’s oil supplies to Belarus after the two countries failed to sign a new agreement.

    There are fears in some European countries that oil supplies might be affected by the dispute. However, Belneftekhim, the Belarusian state-run oil company, said oil-pumping stations were still operating as normal.

    Russia supplied hydrocarbons to Belarus with a decreased coefficient, but the agreement expired on January 1, 2010.

    Minsk received significant discounts on Russian oil imports in 2009. Moscow offered to eliminate duties only on oil for Belarus’ internal consumption, but exports for Europe should go with the full payment of customs duties.

    Russian Prime Minister Vladimir Putin expressed hope that the talks with Minsk will be completed soon. On January 4 he instructed Vice Premier Igor Sechin to promptly coordinate the conditions of supplies to Belarus.

    Sechin told the premier that Russia began duty-free supplies of hydrocarbons to Belarus, and supplies to European consumers also proceeded without fail.

    Despite the fact that the agreement has not been signed, Moscow continues “preferential supplies” to Belarus that are necessary for internal consumption, Sechin said, citing Russia’s “exclusive attitude” to Minsk.

    As the oil spat has already pushed up oil price on world markets, officials in Belarus expressed readiness to continue talks, but at the same time warned of the possible cutting of electricity supplies to the Kaliningrad Region, which was taken as “blackmail” in Russia.

    “The Belarusian authorities have found a new trump card in fighting Russia’s desire to review conditions of oil supplies and transit on the republic’s territory,” Vzglyad.ru online newspaper said.

    “Minsk has presented an ultimatum, stressing the need for an urgent new agreement on the transit of Russia’s electricity,” it said. “ At the same time, all Moscow’s proposals [regarding oil supplies] go unnoticed.”

    However, Minsk denies “any link between oil and electricity,” the paper said, adding that Minsk got a 36% discount on customs duties according to the previous agreement.

    A dispute over Russia’s oil supplies to Belarus may hinder further political integration between the two allies, analysts say.

    The spat started at the time when the Customs Union of Russia, Belarus and Kazakhstan that was signed on November 27, 2009 has now come into force.

    Belarusian officials said that the conditions of the Customs Union imply full elimination of duties in the trade between the two countries. Russia’s proposals put oil supplies outside the configuration of the Customs Union and might undermine the single economic space, they say.

    “Belarusian President Aleksandr Lukashenko wants ‘dividends’ from the Customs Union,” believes Sergey Aleksashenko of the Higher School of Economics. These dividends are “simple – duty-free supplies of Russia’s oil,” he said in his blog.

    “This approach has its own logic: if the Customs Union is an organization without internal customs barriers, then there should not be any duties for oil exports,” he said.

    Now it is clear why Belarus and Kazakhstan need the union, “but it is difficult to understand why Russia needed it,” the analyst added.

    However, Boris Gryzlov, speaker of the State Duma, sounded rather optimistic on January 4, saying that the introduction on common customs tariffs was the “most visible and real step towards the integration” of the three former Soviet Union republics.

    Analysts consider any economic dispute between Moscow and Minsk a political one, as the two countries are chief allies on the post-Soviet space.

    The question is now “if Russia is ready to subsidize Belarusian economy granting it oil duty benefits,” Nikolay Petrov of the Carnegie Moscow Center told Business FM radio.

    “There are some spheres where Russia depends on Belarus,” Petrov said. “In particular, it is the supplies for Kaliningrad Region,” the analyst stressed. “It is an enclave, and electricity supplies go to it through Belarusian territory,” he added.

    Oil transit also goes via Belarus, Petrov stressed. “Using these advantages, Minsk intends to get benefits in oil supplies", he said, “to sell refinery products to the West for more competitive prices.”

    Now the outcome of the talks also depends on who will lose their nerve first, Petrov believes. “Belarus is negotiating in its own manner, exchanging promises for real economic benefit,” he said.

    Meanwhile, as the talks on Russia’s oil supplies continue, Minsk announced on January 5 that Lukashenko has ratified a package of agreements within the framework of the Customs Union.

    Sergey Borisov, RT
    source

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    [...]

    Both sides have expressed their willingness to continue the talks, a Belarussian government spokesperson said, without specifying when they might resume. Oil supplies have continued to Belarus, even though the previous supply agreement expired Dec. 31.

    [...]

    “Belarus is holding back the negotiation process. Russia has made unprecedented and very comfortable proposals about duty-free oil supplies. … But Belarus is demanding more,” Energy Ministry spokeswoman Irina Yesipova told Reuters.

    “The Russian side has de facto ignored arguments and calculations presented by the Belarussian side,” a Belarussian government spokesman told Interfax, adding that the Belarussian delegation had returned home.

    [...]

    http://www.themoscowtimes.com/busine...te/397094.html
    The show is going on.

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    A well staged theatre. All will be good and resolved with few shots of vodka, as always

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    Quote Originally Posted by Jarl View Post
    A well staged theatre. All will be good and resolved with few shots of vodka, as always
    Yep, these guys do their best to entertain us. I demand free popcorn!

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    It is repeating itself every year. Quarrels between Russia and Belarus, which very quickly get resolved.

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    Russia, Belarus oil tiff resolved — for now

    Belarus's Lukashenko has few cards to play in disputes with Russia.

    By David L. Stern - GlobalPost
    Published: January 29, 2010 07:14 ET


    KIEV, Ukraine — Russia and Belarus ended a month-long standoff over oil tariffs this week, signing an agreement that officials touted as striking a middle ground between Minsk and Moscow.

    But the accord was in fact a victory for Russia, observers said, revealing the weakness of Belarus’s position, and may point to more difficulties to come between the two Slavic “brother nations.”

    At issue was the Kremlin’s sudden cancellation of a long-standing arrangement to provide cheap oil to Belarusian President Aleksander Lukashenko’s authoritarian regime. Russia exported more than 20 million tons of oil to Belarus annually, which under the two nations’ customs union, was subject to only one-third of the usual export tax.

    Belarus used about 6 million tons domestically. The rest it processed at its two oil refineries and exported to Ukraine and western Europe, charging the usual export tariff and pocketing the difference.

    Moscow refused to renew the contract when it expired on Dec. 31 and demanded that Minsk pay the full export tax for the oil it sold abroad. The new terms potentially meant a loss of $2 billion to $3 billion dollars — an enormous sum for the cash-strapped Lukashenko government, which has counted on cheap Russian oil and gas to subsidize its post-Soviet welfare state.

    “In the past the oil has been a massive earner [for Belarus] — more important in many ways than the cheap gas,” said Andrew Wilson, senior policy fellow at European Council on Foreign Relations in London. “It put money in the regime’s pocket — its political slush fund.”

    In their negotiations, the two sides played a game of political chicken. Russia threatened to decrease if not completely cut off the oil it supplied to Belarus’s domestic industry; Belarus for its part has the power to potentially block all Russian oil traveling through the Druzhba pipeline, which crosses its territory and supplies about 10 percent of Europe’s oil.

    Neither side, however, carried out its threats, real or implied, and in the end the two sides reached a compromise of sorts. Russian Deputy Prime Minister Igor Sechin and Vladimir Semashko, Minsk’s first deputy prime minister, signed an agreement Wednesday whereby Belarus would received 6.3 million tons of oil duty free for domestic use, but the amount could increase after September, depending on whether the country’s economy recovers from its recession. Tariffs would rise by 11 percent over the original reduced rate on the remaining oil that crosses Belarus, agencies reported.

    “The position of the Belarussian side was very harsh for us. We agreed to a number of compromises, bearing in mind the special relationship with a brother republic, with the people of Belarus,” Sechin said in published comments.

    The full scope of the contract is unclear however. Some analysts at first glance declared Belarus nevertheless the loser. Minsk it seems is receiving less now that it was before. This, no matter how you look at it, is a blow to Lukashenko’s government, which is finding it increasingly difficult to meet its financial obligations.

    Semashko for his part said that Belarus's “budget losses will not be as high as was envisaged very recently,” the Russian Interfax news agency reported.

    The defeat is linked to the fact that Lukashenko, who, it is said, takes pride in his ability to overcome any political obstacle — and who faces re-election in February 2011 — finds himself with ever decreasing space to maneuver.

    Chris Weafer, senior strategist for Uralsib Bank in Moscow, said that Lukashenko, having long pursued a policy that turned its back on the West, “hasn’t developed the relations and therefore now doesn’t have any other international options.”

    “He’s backed himself into a corner,” Weafer added. “Belarus needs that subsidy.”

    Lukashenko could weather his financial problems, observers say, by striking further bargains with Moscow. The Kremlin can provide money (the last $500 million tranche of a stand-by loan has been frozen for instance) but most likely Moscow officials would require choice pieces of the Belarus economy in return. Russian oil interests have been eyeing increased stakes in Belarus’s pipeline network and its two marquee refineries, Mozyr and Naftan.

    Making matters worse, Belarus’s negotiating ace-in-the-hole — its ability to close down the Druzhba pipeline — may soon be obsolete as well. Russia has long planned to build by 2013 a spur to its Baltic Pipeline System that bypasses its Slavic neighbor and supplies Europe directly.

    On the other hand, Lukashenko could turn his back on Russia’s money and open up his country to western investment. Washington and Brussels are requiring political reform, however, and western companies are waiting for economic restructuring before they commit to sinking major funds into Belarus. Lukashenko has made a number of political and economic gestures in the last year, freeing political prisoners and discussing major privatizations. He appears either unwilling or unable to undertake further significant reforms, however, most likely because this could entail weakening his grip on power.

    Ultimately, Russia, Belarus and Kazakhstan are supposed to form a single customs space by mid-2011. This date, however, is constantly being pushed back — a victim of such thorny issues like how to tax Russian oil exports. For this reason, some observers believe the disputes between the two countries will become not better, but worse.

    “As long as they are joined in a union, relations between Russia and Belarus will not be normal,” said Vitali Silitski, director of the Belarusian Institute for Strategic Studies in Minsk. “Like with any problem family, the solution can only be divorce.”

    source
    Fa-a-ail!

    More reading:

    Belarus Accepts Drastic Reduction in Oil Subsidy From Russia

    Russia wants Belarus to keep away from alternative energy routes

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    Belarus sues Russia over oil duty

    Thu Mar 25, 2010 2:38pm IST

    MINSK, March 25 (Reuters) - Belarus has filed a lawsuit against Russia over oil export fees, the Belarussian justice ministry said on Thursday.

    The suit was filed to an official Commonwealth of Independent States court.

    Russia allowed Belarus to import oil last year at only 35.6 percent of its crude export tariff.

    But in January the two countries signed a new supply deal resolving a month-long row that had threatened to disrupt Russian oil flows to European Union members Germany and Poland.

    Under the new agreement, Belarus will have to pay full export duties for much of the oil it receives from Russia.

    (Reporting by Andrey Makhovsky and Vladimir Soldatkin; Editing by Alfred Kueppers)

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