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Oil supplies to European nations hit

Russia's spat with Belarus has led to the closure of vital Druzhba pipeline, choking off oil supplies to several European countries, reports Fred Weir.

india Updated: Jan 09, 2007 17:33 IST
Fred Weir
Fred Weir

Russia is facing a political storm over its reliability as an energy supplier after an escalating spat with neighbouring Belarus caused a shutdown in the vital Druzhba pipeline, choking off oil supplies to several European countries.

A high-level Belarussian delegation arrived in Moscow on Tuesday in a last-ditch effort to negotiate the dispute, which threatens to grow into an international scandal similar to last year's gas war with Ukraine.

"I am concerned about the closure of the important Druzhba pipeline," German Economy Minister Michael Glos told the RIA-Novosti agency.

"This incident once again shows that high reliability requires a balanced and mixed energy complex, which would avoid any unilateral dependence."

European countries say they have sufficient reserves on hand to meet immediate needs, but warn that any long-term shutdown could threaten shortages.

"We expect supplies via Belarus to be resumed soon and in full," Glos added.

On Tuesday, Russia shut down the northern leg of the 2,500-mile-long Druzhba pipeline, which carries up to 2 million barrels of Siberian crude daily to European customers, triggering shortages and refinery shutdowns in western Europe, which depends on Russia for a third of its energy supplies.

The head of Russia's Transneft pipeline company, Semyon Vainshtok, accused Belarus of "siphoning off" oil destined for European customers, and said the pipeline would be shut until the problem was resolved.

The disruption has grown out of a political squabble between Russian President Vladimir Putin and Belarussian leader Alexander Lukashenko over a plan to unify the two former Soviet countries.

On New Year's eve, Belarus was compelled to sign a deal that effectively doubled the price it pays for Russian gas, to $100 per thousand cubic meters, and agreeing to sell 50 per cent of its pipeline network, Beltransgaz, to Russia's gas monopoly Gazprom.

Last week, Belarus retaliated by imposing a special $45 transit duty on each metric ton of Russian crude pumped through the Druzhba pipeline, a move that has been called "illegal".

Belarus says it began siphoning oil from the Druzhba pipeline after Russia refused to pay the tax.

The quarrel is reminiscent of last year's shutdown of Russian gas supplies to Ukraine which caused similar energy jitters in Europe.

After a brief standoff Ukraine, whose Western-leaning policies had angered Moscow, was compelled to accept much higher prices for its gas.

Belarus, a heavily-industrialised Slavic nation of 10-million, has been Russia's closest ally in the post-Soviet region since Lukashenko came to power a dozen years ago.

Moscow has treated Belarus almost like a part of Russia, granting it subsidies estimated as high as $8-billion annually, in the form of cheap gas, duty-free oil and favoured access to Russian markets for Belarussian industrial goods.

But experts say the Kremlin has been disappointed with Lukashenko's authoritarian ways and refusal to let Russian companies invest freely in Belarus.

"Russia doesn't see any returns on its investments in Belarus," says Gennady Chuffrin, deputy director of the official Institute of World Economy and International Relations in Moscow.

"The Kremlin believes it has a strong hand to play and that Lukashenko, a political outcast, has little chance of holding out for long against Russian pressure."

First Published: Jan 09, 2007 17:33 IST