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Russia Halts Oil Flow To Belarus in Dispute
Quarrel Reignites Worries in Europe Over Reliability of Key Energy Supplier

By Peter Finn
Washington Post Foreign Service
Tuesday, January 9, 2007

MOSCOW, Jan. 8 -- Russia on Monday shut off crude oil supplies that flow by pipeline across Belarus to Germany, Poland and other parts of Eastern Europe, charging that Belarus was illegally siphoning off oil meant for the other countries.

The dispute between two erstwhile allies will have little immediate effect because the end-customer countries have strategic reserves for at least two months. But it is rekindling discussion in Europe about the reliability of Russia as a supplier of energy.

"This shows us 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," Poland's deputy economy minister, Piotr Naimski, said in a television interview. Poland has long been suspicious of Russia's dominance of energy supplies on the Continent.

Belarus, led by authoritarian President Alexander Lukashenko, has poor relations with the United States and Western Europe. It is unlikely to garner the kind of international sympathy that Ukraine, for example, enjoyed when Russia cut off its natural gas in a pricing dispute last January.

The convulsions over Russia's pricing of energy supplies to its neighbors also extend to Azerbaijan, which announced Monday that it had halted the export of oil to Russia. Officials in the Caspian Sea nation said they planned to divert the oil to power stations in their country to replace Russian natural gas.

Russia doubled the price of natural gas for Azerbaijan on Jan. 1, but the country refused to accept the rate of $230 per 1,309 cubic yards, the price that Western European countries pay.

The disputes with Belarus and Azerbaijan, following Russian confrontations with Ukraine and Georgia, are likely to give new urgency to efforts in parts of Europe to diversify the supply chain and reduce dependence on Russia, one of the Continent's most important suppliers. In 2004, it provided about 27 percent of the oil consumed in the European Union, according to the bloc.

For years, Russia and Belarus have been bound together by Moscow's provision of cheap energy in return for political loyalty. But the Kremlin appears to have tired of subsidizing Lukashenko, whose government could face an economic crisis brought on by higher energy costs.

The two countries have flirted with the idea of forming a political union, but Russia is interested in absorbing Belarus as a province, while Lukashenko has insisted on a union of equal states, an idea the Kremlin finds ludicrous. The idea appears finished, at least under the current leadership of both countries, according to Irina Kobrinskaya, an analyst at the Institute of World Economy and International Relations in Moscow. "The union state is a myth," she said in an interview.

The European Union's energy commissioner, Andris Piebalgs, said he wanted an "urgent and detailed explanation" from both Belarus and Russia as to why the pipeline carrying Russian crude was closed. European officials said Germany has enough oil in reserve to last 130 days, and Poland has enough for 70 days.

Each year, approximately 100 million tons of Russian oil crosses Belarusan territory in pipelines. Russian officials said they were examining ways of rerouting oil. The pipeline network crossing Belarus also supplies the Czech Republic, Hungary, Lithuania and Slovakia.

Belarus's command economy has been heavily dependent on subsidized natural gas and crude oil from Russia, which is now insisting that the government in Minsk pay more.

On New Year's Eve, Belarus reluctantly agreed to a doubling of natural gas prices and a gradual shift to market prices by 2011. The deal also provided for the Russian state-controlled energy giant Gazprom to acquire a 50 percent stake in the gas pipeline system owned by Belarus.

But the two countries continued to spar over cheap crude oil. Belarus has earned billions of dollars from processing cheap Russian oil and then exporting it to Western Europe. Last month, Russia imposed an export duty of $180 per ton of oil sold to Belarus, a severe blow to the country's reprocessing industry and government revenue. Belarus responded by imposing an import duty of $45 per ton of Russian oil that crossed its territory.

Russia accused Belarus of siphoning off 79,000 tons of crude oil since Saturday and threatened retaliation.

"This looks like a trade war," Andrei Sharonov, Russia's deputy economic development and trade minister, said on Echo Moskvy radio. "One should not forget that Russia is the biggest market and number one economic partner for Belarus. Therefore we have the possibility to apply measures to Belarus and get the duty canceled."

A Belarusan delegation flew to Moscow Monday evening for emergency talks.

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