Russia Diverts Oil Around Belarus
New Pipeline Transports European Oil Supplies through Primorsk
Following a series of disputes, Russia bypasses existing oil pipelines through Belarus, redirecting their supply of oil to Europe through Primorsk on the Baltic Sea.
For three days in early January 2007, Russia halted supplies of oil to European markets via its Druzhba pipeline that runs through the country of Belarus. Belarus was accused of illegally siphoning off oil from the pipeline as payment for new transit fees.. This disruption of service affected crude oil supplies to Ukraine, Poland, and countries of the European Union. In total, 30% of all European Union oil imports come from Russia, and half of that runs through Belarus.
Causes of the Oil Dispute
This shutdown came one week after last-minute negotiations between Russia and Belarus over supplies of natural gas to Belarus. For years, countries of the former Soviet Union had been paying Russia a deeply discounted rate for oil and natural gas. For example, in 2006 Belarus paid just over $46 per 1,000 cubic meters of gas while European Union countries paid $290. Russia has said it is only raising the cost of their oil and natural gas to market levels. The plan is to have the former Soviet countries paying the same as the European Union by 2011.
Historical Troubles Between Russia and Belarus
Disputes between the two countries can be traced back to 1996 when Belarus president Alexander Lukashenko and then Russian president Boris Yeltsin planned to merge the two countries as a "union state." This would allow the countries to be independent entities, but implement some political, economic, and social integration. While some contracts have been signed over the past ten years, there were many disagreements including the imposition of customs controls along the border in 2001. Relations between the countries have since cooled, and current Russian president Vladimir Putin now seems to have little interest in the union.
With weakened relations, Russia began charging a new duty on oil sold to Belarus. Responding to that act, Belarus instituted a new fee for shipping oil through Belarus to Europe. Apparently, Belarus decided the easiest way to receive payment of their fees was to take oil from the pipeline.
Construction Plans for New Pipeline System
Russia is seeking to be less dependent on other countries for the transportation of its energy resources. In an attempt to accomplish this goal and have fewer dealings with Belarus, Russia has approved the construction of the second phase of their Baltic pipeline system (BPS-2). This pipeline will allow Russia to supply oil to the European Union market without sending the oil through Belarus and Poland by routing the fuel to the Baltic port of Primorsk. Russian Prime Minister Sergei Ivanov has stated that the BPS-2 pipeline should be constructed in a relatively short time frame, estimated by some to be as soon as 18 months. Current plans are divert approximately half of the current Druzhba throughput to BPS-2. When BPS-2 is put into production, Belarus faces a possible loss of revenue of 3-400 million Euro per year.
References
Myers, Steven Lee. "Oil dispute a crude awakening for Belarus." January 11, 2007.
