Belarusian-Russian Oil Supply Talks Continuing in Moscow

Talks on Russian oil deliveries to Belarus and oil transit across the Belarusian territory has resumed in Moscow after a New Year break.

Negotiations held in the closing days of 2009 ended in a failure, with the Belarusian government complaining of "unprecedented pressure" on its delegation and calling on Russia to continue deliveries to Belarus under the old terms until a new agreement could be signed.

Under an agreement that was signed on January 12, 2007 and expired on December 31, 2009, crude oil exported to Belarus was subject to reduced export duty, which was 35.6 percent of the rate applied to oil exports to other countries.

Russia offered to supply up to six million tons of oil to Belarus free of duty for its domestic consumption in 2010. An agreement was reached for Belarus to receive a total of 21.5 million tons of oil in 2010 and Moscow wanted the amount to be supplied in excess of the six million tons be subject to the full duty rate, warning that if a new agreement on the terms of oil deliveries failed to be signed, all oil supplied to Belarus would be subject to the full duty rate starting January 1.

Minsk reportedly demanded that all Russian oil to be supplied to Belarus be exported duty-free, explaining that this would meet the spirit of agreements recently reached by Belarus, Kazakhstan and Russia to form a customs union. "A departure from these agreements and the removal of the entire energy sector of Belarus from the scope of the signed accords on the establishment of the customs union would in many respects undermine all agreements reached for the further integration of our states," said the press office of the Belarusian Council of Ministers in a statement issued on January 1.

On the same date, Russia reportedly suspended oil deliveries to Belarus’ refineries, but warned that oil transit to Europe via Belarus would continue in full. Mikhail Barkov, vice president of Transneft, Russia`s oil pipeline monopoly, said on Sunday that oil transit via Belarus would not be reduced in any circumstances while oil deliveries to Belarus depended on Minsk`s position.

"Transit is carried out in full while the negotiating process is continuing," said Irina Yesipova, aide to the Russian energy minister.

Reuters reported on Sunday with reference to unnamed Russian oil traders that no oil had been supplied to Belarus since January 1, but the two Belarusian refineries had enough stockpiled crude to continue operations for around a week.

The traders reportedly said that Minsk had threatened to raise tenfold transit fees for Russian oil deliveries to Poland and Germany to $45 per ton in retaliation for Russia’s requirement for oil exports to Belarus to be subject to the full duty rate.