Belarus says Russia should continue subsidising oil

[Mango Madness]

Belarus says Russia should continue subsidising oil

* Delegations hold talks on pricing for oil exports



http://www.*******.com/article/idUSLDE6050OD20100106?type=marketsNews

* Talks come after brief supply halt to Belarus refineries
* Belarus says position has not changed on oil supplies

MOSCOW, Jan 6 (*******) - Belarus on Wednesday insisted that Russia should continue billions of dollars in oil subsidies, potentially complicating talks aimed at resolving a dispute that has raised the spectre of disruption to European Union supplies.

Russia briefly cut oil supplies to Belarussian refineries this month, helping to push U.S. crude CLc1 prices on Tuesday to the highest close in 15 months, though there was no impact on transit flows to Europe.

As talks began in Moscow on resolving the dispute, a spokesman for the Belarussian embassy was quoted as saying Belarus's position was unchanged and that Minsk still expected the duty-free imports of Russian oil.

"The position of the Belarussian side in the talks is based on the need to implement all previously reached agreements," Belarus's state news agency BelTA quoted the spokesman as saying.

Russia says Belarus should pay the full export duty while Belarus wants to keep the subsidies, which help prop up its $50 billion economy with the sale of oil products refined from imported Russian crude.

Russia allowed Belarus to import oil while paying just 35.6 percent of the current crude export tariff in 2009 though Moscow says Belarus should now pay full duties on the crude which is then refined into oil products and sold for export by Belarus.

Russian Prime Minister Vladimir Putin has said Belarus can buy 6 million tonnes this year for domestic needs without paying duties.

But that leaves another 14.5 million tonnes of crude a year that Moscow says Belarus should pay at least the full $267 a tonne duty on, a potential additional annual payments for the Belarussian economy of at least $2.5 billion.

Russia has repeatedly clashed with its neighbours over energy pricing in recent years. A dispute with Ukraine last winter left EU customers without gas for almost two weeks in the dead of winter, severely straining ties with the European Union.

Russian Deputy Prime Minister Igor Sechin, who holds sway over the oil and gas sector of the world's biggest energy producer, said on Monday supplies along the Druzhba pipeline to Europe were continuing normally.

After a row with Minsk in 2007, Russia briefly cut off supplies along the pipeline, whose Belarus arm supplies about one tenth of European supplies from the Russian oil fields of Western Siberia.

Belarus says about 68 million tonnes of oil is carried every year through Druzhba (which means "Friendship" in Russian) to European Union customers. The European Union consumed about 702.6 million tonnes of oil in 2008, according to the BP Statistical Review of World Energy.

In 2008, Germany received around 350,000 barrels per day (bpd) of crude via Druzhba, or just under 15 percent of its total consumption. Refineries belonging to Total (TOTF.PA (http://www.*******.com/finance/stocks/overview?symbol=TOTF.PA)), Shell (RDSa.L (http://www.*******.com/finance/stocks/overview?symbol=RDSa.L)) and BP (BP.L (http://www.*******.com/finance/stocks/overview?symbol=BP.L)) 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 exported another 90,000 bpd of Druzhba crude via the Baltic Sea port of Gdansk.
For a graphic click here (http://graphics.thomson*******.com/RNGS/2010/JAN/RUSSIA.jpg) (Additional reporting by Minsk bureau, writing by Guy Faulconbridge; editing by James Jukwey)

[Mango Madness]

Russia beckons Belarus to heel in oil supply row



http://www.*******.com/article/idUSTRE6043SM20100105
MOSCOW/MINSK (*******) -
Russia is trying to bring Belarus to heel by threatening to cut at least $2.5 billion in energy subsidies that prop up the economy of its ex-Soviet neighbor, analysts said.

Russia briefly cut oil supplies to Belarussian refineries this month in the dispute over Belarus's lucrative business in exports of oil products refined from Russian crude, again raising the specter of supply disruptions for EU customers.

But the rift, which helped push U.S. crude above $81 a barrel on Monday, is about much more than energy subsidies. At stake is the political future of Belarus, which is wedged between Russia and the European Union, and key Belarussian refineries that the Kremlin would like to see in the hands of Russian companies.

Analysts said Russia is using its energy might to bring Belarussian President Alexander Lukashenko to heel after attempts by the former Soviet farm director to leverage dependency on Moscow with overtures toward European powers.

"Russia is playing hardball and bringing Belarus into line," said Chris Weafer, chief strategist at Uralsib Capital, a Moscow investment bank. "Lukashenko doesn't really have any options -- he has nowhere to go except Russia, and the Kremlin knows it."

Lukashenko, in power since 1994, admitted last month that he would face "political death" if he moved out of Moscow's orbit, though he has tried to build ties with the West since falling out with Moscow in 2007 over a hike in energy prices.

He has openly strained relations with Russian Prime Minister Vladimir Putin. The Kremlin was furious in June when Lukashenko snubbed a security summit in Moscow.

Belarus has long been isolated because the West said Lukashenko ran Belarus like a post-Soviet dictatorship, though the EU has now said it is willing to improve ties with Minsk.

OIL TRADING
The row with Russia centres on oil duties paid for millions of tons of oil that Belarus has imported from Russia with steep discounts.

Russia allowed Belarus to import oil for domestic use duty-free, while paying just 35.6 percent of Russia's crude export tariff for oil that is then refined and sold onwards.

Putin said Belarus can buy 6 million tons this year for domestic needs without paying duties, leaving 14.5 million tons of crude that Moscow says Minsk should pay at least the full $267 a ton duty on.

That would amount to a hike of about $2.5 billion in 2010, or about 5 percent of Belarus's $50 billion economy, which is deeply dependent on the export of subsidised oil products.

"Oil products are one of the main sources of export income for Belarus," said Yaroslav Romanchuk, the director of the Mizes think tank in Minsk. "Last year, oil products made up 37 percent of exports."

Russian Deputy Prime Minister Igor Sechin, who holds sway over the oil and gas sector of the world's biggest energy producer, warned on Monday that there was still no agreement on oil pricing with Belarus.

ENERGY POWER
By demanding such a painful hike in customs duties, Moscow could force Belarus to the negotiating table on a host of issues including the sale Belarussian assets to Russian companies.

Belarus has yet to decide whether it will sell a stake in the Naftan oil refinery to Rosneft (ROSN.MM (http://www.*******.com/finance/stocks/overview?symbol=ROSN.MM)), a state controlled Russian oil company whose board is chaired by Sechin, or LUKOIL (LKOH.MM (http://www.*******.com/finance/stocks/overview?symbol=LKOH.MM)), Russia's second largest oil producer.

"Russian capital wants to get into the oil sector," said Alexander Klaskovsky, an independent political analyst in Minsk.

Russia has repeatedly clashed with its neighbors over energy pricing in recent years. A dispute with Ukraine last winter left EU customers without gas for almost two weeks in the dead of winter, severely straining ties with the European Union.

But Moscow views the disputes as a way to increase European Union interest in projects -- such as the expanded terminal in the Baltic Sea port of Primorsk and the North Stream gas pipeline -- which bypass transit states such as Belarus.