Gashostage.com

Europe’s oil supplies from Russia were being held to ransom last night as the Kremlin fell into bitter dispute with a former Soviet satellite state.
 
Moscow abruptly halted millions of barrels of oil destined for the EU via Belarus in an increasingly hostile wrangle with its neighbour.

The move raised further questions over whether Western Europe can trust Mr Putin for its energy supply. Experts said that Russia had a deeply entrenched habit of manipulating oil and gas supplies as a substitute for diplomatic policy.

Russia’s strong-arm tactics have added resonance in Britain, amid persistent speculation that Gazprom, the Kremlin-controlled gas group, will seek to buy Centrica, the British Gas group, which has 16 million gas and electricity customers in the UK. Angela Merkel, the German Chancellor, told The Times last night that Germany will use its six-month EU presidency to improve energy security on the Continent. In her first interview with a British newspaper she signalled that she would take a harsher line towards Russia than her predecessor, Gerhard Schröder, who is now on the board of a German-Russian consortium constructing a gas pipeline linking Russian gasfields with Western Europe.

“For us, energy is what coal and steel used to be,” she said, referring to the driving forces behind the European project.

Russia’s “gas war” with Ukraine last January caused supplies to Europe to drop briefly by a third during one of the coldest winters recorded. In this case, Mr Putin’s struggle with President Alexander Lukashenko of Belarus, branded “Europe’s last dictator” by the US, once again reduced the EU to watching nervously from the sidelines as its energy supplies were hit.

Belarus considered itself Moscow’s closest ally until a week ago, but was on the verge of a trade war last night after the bitter flare-up over oil duties. More than 1.2 million barrels of oil a day flow from Russia through the Druzhba, or Friendship, pipeline, providing almost a quarter of Germany’s needs and 96 per cent of Poland’s imports, as well as supplies to Ukraine, Hungary, Slovakia and the Czech Republic.

Andrei Sharonov, Russia’s Deputy Trade and Economic Development Minister, accused Belarus of jeopardising contracts with European customers by imposing a tax on oil passing through the pipeline. Relations between the two countries have soured rapidly since New Year’s Eve, when Belarus and Russia’s state-run monopoly Gazprom came within minutes of failing to agree a gas contract for 2007.

The Government in Minsk was forced to accept a doubling of gas prices to prevent supplies from being cut to its ten million citizens.

The oil dispute centres on a tit-for-tat row over taxes. Minsk introduced a penalty on January 1 on Russian oil crossing Belarus to Europe, in retaliation against Moscow’s decision to slap a duty on oil it sold to Belarus. A government delegation from Belarus flew to Moscow last night to try to negotiate a settlement. But Mr Sharonov said that there would be no talks until Minsk cancelled its tax. Europe should expect to see the natural resources giant use the same ploy in the future to extract market prices for oil and gas out of former Soviet states, experts said.

Andris Piebalgs, the EU Energy Commissioner, said that he was seeking an “urgent and detailed explanation” about the cut in oil deliveries.

Read more >>

Russian oil supplies to Poland and Germany have been cut at Poland’s eastern border with Belarus, Polish pipeline company PERN said, and a Russian company has accused Belarus of diverting the flow.

In a new twist to tension between Minsk and Moscow over oil supplies and transit to western Europe, PERN spokesman Tomasz Zakrzewski told AFP on Monday: “Deliveries were disrupted overnight and then totally cut off Monday morning on the main Druzhba pipeline, which supplies crude oil to Poland and Germany.

“Fifty million tonnes of crude pass through the Druzhba pipeline each year. Of that, 18 million tonnes are supplied to Poland and 22 million tonnes to the German refineries of Schwedt and Mider Spergau,” he said.

Polish oil groups Orlen and Lotos receive Russian crude through the Druzhba pipeline, which first came onstream in 1964.

Russian pipeline operator Transneft accused Belarus of siphoning oil from the pipeline.

“Since January 6, the Belarussian side has unilaterally, and without warning anyone, begun illegally siphoning oil from the Druzhba pipeline, which is solely for transport to customers in western Europe,” Transneft head Semyon Vainshtok was quoted as saying Monday by the RIA Novosti news agency.

But the head engineer at Belarus’ Gomel Transneft Druzhba, which operates the pipeline, said oil supplies to Poland and Germany had only been reduced, on orders from state energy company Belneftekhim, not completely halted.

“We did not cut it off. We are working. But there has been a reduction,” Alexander Bordovsky told AFP.

The development comes amid a row between Minsk and Moscow over Russian crude which is pumped through Belarus on its way to customers in the European Union.

About 100 million tonnes of Russian crude pass through pipelines in Belarus each year on the way west to customers in the Czech Republic, Lithuania and Slovakia, as well as Germany and Poland.
At the beginning of the year, Belarus slapped a transit tax on Russian crude that passes through the country in response to a Russian decision to impose export duties on crude oil that Belarus buys from Russia.

The row over transit fees came just days after Belarus had narrowly averted a cut-off in Russian natural gas supplies by agreeing to a demand by Russian monopoly Gazprom that Minsk pay double last year’s price for imported gas.

The Polish economy ministry issued a statement Monday assuring that “Polish refineries have sufficient reserves” to continue functioning normally until crude supplies can be restored via a Baltic Sea terminal.

“Poland also has strategic oil and gasoline stocks for 80 days, which will be used in the event of need,” the statement said.

A different section of the Druzhba pipeline near Russia’s border with Belarus ruptured in July last year, causing the flow of Russian crude to the Mazeikiu Nafta refinery in Lithuania to be cut off.

That interruption to supplies occurred shortly after Poland’s Orlen had signed an agreement to buy the Baltic oil facility from bankrupt Russian oil company Yukos.

Supplies by the pipeline to Mazeikiu have not yet been restored, affecting — along with other incidents — the Baltic oil complex’s bottom line, which has been forecast to be 20 percent down in 2006 compared with the results the previous year.

Officials in Lithuania have speculated that the halt in supplies to Mazeikiu was politically motivated because Moscow was irked that the Baltic oil group had been sold to a Polish firm, not one of the Russian ones that had bid for it, and that Yukos had skirted the Russian legal system when it sold Mazeikiu.

The Russians, on the other hand, have blamed last year’s cut-off on technical problems, with Oleg Mitval of the Russian natural resources ministry saying last July that “hundreds of faults” had been discovered on the ageing pipeline.

Read more >>

Belarus has blocked the transit of Russian oil through its territory to European countries including Germany and Poland, news reports said Monday, raising the stakes in a bitter energy dispute between Russia and the neighboring former Soviet nation.

EU energy chief Andris Piebalgs said Monday the cuts pose “no immediate risk” to energy supplies in the EU, but that he was seeking an “urgent and detailed explanation” of the cuts from authorities in Belarus and Russia.

The head of the Russian state pipeline operator Transneft, Simon Vainshtok, accused Belarus of siphoning off Russian oil through the Druzhba, or Friendship, pipeline that was destined for Europe since the weekend.

“On Jan. 6 the Belarusian side, without warning anyone, unilaterally started illegally siphoning off oil from the Druzhba pipeline designed solely for the transportation of oil to consumers in Western Europe,” Vainshtok was quoted as saying by Russian news agencies.

The Transneft chief said that Belarus had diverted 79,000 tons of oil so far and called on Minsk to ensure the uninterrupted transit of oil. He added that Russia was doing everything it could to boost oil exports to Europe via other routes.

The 2,500-mile-long pipeline has the capacity to ship over 1.2 million barrels a day to eastern and central Europe and generally works at or close to its full capacity.

Belneftekhim, a large state Belarusian industrial and energy holding company, ordered the suspension of transit of oil through Druzhba to Germany, Poland and Ukraine, the Interfax and ITAR-Tass news agencies quoted unidentified officials from the pipeline’s Belarusian section as saying.

Contacted by The Associated Press, officials from Belneftekhim declined to comment.

In Warsaw, the Economics Ministry said Monday that Poland was suffering disruptions in oil deliveries from the pipeline that crosses Belarus, the result of the dispute between Moscow and Minsk.

“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, told TVN24 television.

The German government confirmed that the pipeline, which supplied two refineries in Germany, had been shut down. “I can confirm the Druzhba pipeline has been closed,” said Economic Ministry spokesman Hendrik Luchtmeier. “We are trying to ascertain the reasons.”

The impact of a short-term stoppage in Poland and Germany is likely to be minimal, as refineries maintain strategic oil stocks.

In a statement read by his spokesman, Piebalgs said he was trying to find out if Slovakia and countries in southeastern Europe were also affected. He said he was considering calling a special meeting of energy experts from the 27 EU nations to discuss the situation, in case they had to draw on oil stocks.

Piebalgs spokesman Ferran Tarradellas Espuny said Poland had 70 days of reserves and Germany 130 days.

The suspension of oil deliveries comes just days after Belarus and Russia reached a last-ditch agreement on gas prices that avoided a New Year’s cutoff of natural gas for Belarusian consumers that threatened a repeat of last year’s energy dispute between Moscow and Kiev.

Belarus grudgingly accepted a doubling of the price it pays for imports of Russian natural gas, on which it depends for industry and home heating.

But the two countries are now locked in a dispute over oil duties, with Russia determined to stop Belarus from re-exporting petroleum products made from processing Russian oil bought cheaply.

Jason Schenker, an economist with Wachovia Corp. (WB) in Charlotte, North Carolina, who covers the oil and gas industry, said that if the dispute is not contained soon, it could cause overall oil prices to rise as sellers from other markets could take the opportunity to raise their own prices.

“If this situation is not resolved with relative expediency, the market may interpret it as a repeat of the Ukraine situation from last year, which would have bullish energy price implications,” Schenker told the AP. “The magnitude of the reaction of energy markets will be directly dependent on how protracted this situation becomes or appears likely to become.”

Several countries in the European Union, which depends on Russia for 25 percent of its gas supply, suffered a brief disruption in early 2006 after Moscow suspended gas deliveries to Ukraine because of a pricing dispute. Ukraine and Belarus are the transit route for Russian gas to Europe.

The inefficient, Soviet-style state-dominated economy in Belarus and leader Alexander Lukashenko’s popularity has depended heavily on subsidized Russian energy – but analysts say the Kremlin has grown impatient at supporting his regime while receiving little in return.

Last week, Belarus announced it would charge an import duty of $45 per metric ton of Russian oil shipped to Western Europe in pipelines that cross Belarus. The move followed Russia’s imposition of an export duty of $180 a ton on oil sold to Belarus.

Read more >>