Russia-Belarus energy dispute
Encyclopedia
Russia
Russia or , officially known as both Russia and the Russian Federation , is a country in northern Eurasia. It is a federal semi-presidential republic, comprising 83 federal subjects...
n state-owned gas
Natural gas
Natural gas is a naturally occurring gas mixture consisting primarily of methane, typically with 0–20% higher hydrocarbons . It is found associated with other hydrocarbon fuel, in coal beds, as methane clathrates, and is an important fuel source and a major feedstock for fertilizers.Most natural...
supplier Gazprom
Gazprom
Open Joint Stock Company Gazprom is the largest extractor of natural gas in the world and the largest Russian company. Its headquarters are in Cheryomushki District, South-Western Administrative Okrug, Moscow...
demanded an increase in gas prices paid by Belarus
Belarus
Belarus , officially the Republic of Belarus, is a landlocked country in Eastern Europe, bordered clockwise by Russia to the northeast, Ukraine to the south, Poland to the west, and Lithuania and Latvia to the northwest. Its capital is Minsk; other major cities include Brest, Grodno , Gomel ,...
, a country which has been closely allied with Moscow and forms a loose union state with Russia. It escalated on January 8, 2007, when the Russian state-owned pipeline company Transneft
Transneft
Transneft is a Russian state-owned business responsible for the national oil pipelines. It was founded in 1993 and owns the largest oil pipeline system in the world, with a total network length of almost...
stopped pumping oil
Petroleum
Petroleum or crude oil is a naturally occurring, flammable liquid consisting of a complex mixture of hydrocarbons of various molecular weights and other liquid organic compounds, that are found in geologic formations beneath the Earth's surface. Petroleum is recovered mostly through oil drilling...
into the Druzhba pipeline
Druzhba pipeline
The Druzhba pipeline is the world's longest oil pipeline and in fact one of the biggest oil pipeline networks in the world. It carries oil some from the eastern part of the European Russia to points in Ukraine, Belarus, Poland, Hungary, Slovakia, Czech Republic, and Germany...
which runs through Belarus
Belarus
Belarus , officially the Republic of Belarus, is a landlocked country in Eastern Europe, bordered clockwise by Russia to the northeast, Ukraine to the south, Poland to the west, and Lithuania and Latvia to the northwest. Its capital is Minsk; other major cities include Brest, Grodno , Gomel ,...
because Belarus was siphoning the oil off the pipe without mutual agreement.
On January 10, Transneft resumed oil exports through the pipeline after Belarus ended the tariff that sparked the shutdown, despite differing messages from the parties on the state of negotiations.
The Druzhba pipeline, the world's longest, supplies around 20% of Germany's oil. It also supplies oil to Poland
Poland
Poland , officially the Republic of Poland , is a country in Central Europe bordered by Germany to the west; the Czech Republic and Slovakia to the south; Ukraine, Belarus and Lithuania to the east; and the Baltic Sea and Kaliningrad Oblast, a Russian exclave, to the north...
, Ukraine
Ukraine
Ukraine is a country in Eastern Europe. It has an area of 603,628 km², making it the second largest contiguous country on the European continent, after Russia...
, Slovakia
Slovakia
The Slovak Republic is a landlocked state in Central Europe. It has a population of over five million and an area of about . Slovakia is bordered by the Czech Republic and Austria to the west, Poland to the north, Ukraine to the east and Hungary to the south...
, the Czech Republic
Czech Republic
The Czech Republic is a landlocked country in Central Europe. The country is bordered by Poland to the northeast, Slovakia to the east, Austria to the south, and Germany to the west and northwest....
, and Hungary
Hungary
Hungary , officially the Republic of Hungary , is a landlocked country in Central Europe. It is situated in the Carpathian Basin and is bordered by Slovakia to the north, Ukraine and Romania to the east, Serbia and Croatia to the south, Slovenia to the southwest and Austria to the west. The...
.
Background
Vladimir Putin
Vladimir Vladimirovich Putin served as the second President of the Russian Federation and is the current Prime Minister of Russia, as well as chairman of United Russia and Chairman of the Council of Ministers of the Union of Russia and Belarus. He became acting President on 31 December 1999, when...
said on January 9, 2007. In 2006 Russia announced a higher price for 2007. After Alexander Lukashenko
Alexander Lukashenko
Alexander Grigoryevich Lukashenko has been serving as the President of Belarus since 20 July 1994. Before his career as a politician, Lukashenko worked as director of a state-owned agricultural farm. Under Lukashenko's rule, Belarus has come to be viewed as a state whose conduct is out of line...
, President of Belarus, rejected this price change, and without a new treaty, Gazprom threatened to cut gas supplies to Belarus
Belarus
Belarus , officially the Republic of Belarus, is a landlocked country in Eastern Europe, bordered clockwise by Russia to the northeast, Ukraine to the south, Poland to the west, and Lithuania and Latvia to the northwest. Its capital is Minsk; other major cities include Brest, Grodno , Gomel ,...
from 10:00 MSK
Moscow Time
Moscow Time is the time zone for the city of Moscow, Russia and most of western Russia, including Saint Petersburg. It is the second westernmost of the nine time zones of Russia. Moscow Time has been UTC+4 year-round since 27 March 2011....
on January 1, 2007. Both sides finally agreed on the following terms:
- Russian gas to be sold to Belarus for $100 per 1000 m³ (compared to Gazprom's original request of $200 per 1000 m³)
- Belarus to sell Gazprom 50% of its national gas supplier BeltransgazBeltransgazBeltransgaz is a natural gas infrastructure and transportation company of Belarus. It operates the main natural gas transit pipelines through Belarus—Northern Lights and Yamal–Europe. Beltransgaz was founded in 1992 on the bases of Zapadtransgaz, a company responsible for the gas transit through...
for the maximal price of $2.5 billion - Gas prices for Belarus to gradually rise to the European market price by 2011
- Belarus's transit fees for Russian gas to increase by around 70%
Another part of the energy dispute is the dispute for oil. In 1995, Russia and Belarus agreed that Russia would not impose any customs on oil exported to Belarus. In exchange, the revenues from this oil processed in Belarus would be shared by 15% for Belarus and 85% for Russia. In 2001, Belarus unilaterally canceled this agreement while Russia continued its duty-free exports. Lukashenko's state kept all the revenues, and many Russian oil companies moved their processing capacities to Belarus. On this arrangement, Russia also lost billions of dollars annually. On December 18, 2006, Russia put an end to this practice, announcing a standard $180 per ton toll on Russian export oil to Belarus. In response, Belarus imposed a tariff of US$45 per ton of oil
Petroleum
Petroleum or crude oil is a naturally occurring, flammable liquid consisting of a complex mixture of hydrocarbons of various molecular weights and other liquid organic compounds, that are found in geologic formations beneath the Earth's surface. Petroleum is recovered mostly through oil drilling...
flowing through the Druzhba pipeline, prompting Russia to claim that the move was illegal and to threaten retaliation, since it contradicts bilateral trade agreements and worldwide practice. Only imported or exported goods are being tariffed while transit goods are not objects of tariffing. Russia rejected paying the newly imposed Belarusian tariffs.
In compensation, Belarus began siphoning off oil from the pipeline. According to Semyon Vainshtok, the head of Russia's pipeline monopoly Transneft
Transneft
Transneft is a Russian state-owned business responsible for the national oil pipelines. It was founded in 1993 and owns the largest oil pipeline system in the world, with a total network length of almost...
, Belarus had siphoned off 79,900 metric tons of oil since January 6. Vainshtok said this was illegal and the move was made "without warning anyone." In response, Russia stopped oil transport on January 8.
A Belarusian team led by Vice-Premier Andrei Kobyakov flew to Moscow
Moscow
Moscow is the capital, the most populous city, and the most populous federal subject of Russia. The city is a major political, economic, cultural, scientific, religious, financial, educational, and transportation centre of Russia and the continent...
on 9 January to pursue a solution but initially reported that they had not been able to start negotiations.
On January 10, the Belarusian government lifted the tariff, and Russia agreed to start negotiations. The oil flow was resumed at 05:30 GMT on January 11. In the wake of the dispute, Gazprom acquired 50% stake in the Belarusian gas pipeline operator Beltransgaz
Beltransgaz
Beltransgaz is a natural gas infrastructure and transportation company of Belarus. It operates the main natural gas transit pipelines through Belarus—Northern Lights and Yamal–Europe. Beltransgaz was founded in 1992 on the bases of Zapadtransgaz, a company responsible for the gas transit through...
for 2.5 Billion USD.
August 2007 developments
Following the alleged violation of previous agreements and the failure of negotiations, on August 1, 2007 GazpromGazprom
Open Joint Stock Company Gazprom is the largest extractor of natural gas in the world and the largest Russian company. Its headquarters are in Cheryomushki District, South-Western Administrative Okrug, Moscow...
announced that it would cut gas supplies to Belarus
Belarus
Belarus , officially the Republic of Belarus, is a landlocked country in Eastern Europe, bordered clockwise by Russia to the northeast, Ukraine to the south, Poland to the west, and Lithuania and Latvia to the northwest. Its capital is Minsk; other major cities include Brest, Grodno , Gomel ,...
by 45% from August 3 over a $456 million debt. Talks are continuing and Belarus has asked for more time to pay. Although the revived dispute is not expected to hit supplies to Europe, the European Commission
European Commission
The European Commission is the executive body of the European Union. The body is responsible for proposing legislation, implementing decisions, upholding the Union's treaties and the general day-to-day running of the Union....
is said to view the situation 'very seriously'.
Following overnight negotiations in Moscow, on August 3, $190 million of the debt was repaid, and Belarus was given a further week to pay the remainder or face a 30% cut in supplies.
As of August 8 Belarus has fully paid its $460 million debt for Russian natural gas supplies, ending a dispute between the country and Gazprom [RTS: GAZP].
Related disputes
The situation is reminiscent of other recent price tensions between Russia, one of the world's energy superpowerEnergy superpower
The term energy superpower does not have a clear definition. It has come to be used to refer to a nation that supplies large amounts of energy resources to a significant number of other states, and which therefore has the potential to influence world markets to gain a political or economic...
s, and other states since the start of 2005. These have resulted in increases in the prices paid for gas by Moldova
Moldova
Moldova , officially the Republic of Moldova is a landlocked state in Eastern Europe, located between Romania to the West and Ukraine to the North, East and South. It declared itself an independent state with the same boundaries as the preceding Moldavian Soviet Socialist Republic in 1991, as part...
(now paying US$170 per 1,000 cubic meter), Georgia
Georgia (country)
Georgia is a sovereign state in the Caucasus region of Eurasia. Located at the crossroads of Western Asia and Eastern Europe, it is bounded to the west by the Black Sea, to the north by Russia, to the southwest by Turkey, to the south by Armenia, and to the southeast by Azerbaijan. The capital of...
(US$235 per 1,000 cubic meter) and Ukraine
Ukraine
Ukraine is a country in Eastern Europe. It has an area of 603,628 km², making it the second largest contiguous country on the European continent, after Russia...
(following the 2006 Russia-Ukraine gas dispute
Russia-Ukraine gas dispute
The Russia–Ukraine gas disputes refer to a number of disputes between Ukrainian oil and gas company Naftogaz Ukrainy and Russian gas supplier Gazprom over natural gas supplies, prices, and debts...
, which also resulted in a 4 day cut to Europe
Europe
Europe is, by convention, one of the world's seven continents. Comprising the westernmost peninsula of Eurasia, Europe is generally 'divided' from Asia to its east by the watershed divides of the Ural and Caucasus Mountains, the Ural River, the Caspian and Black Seas, and the waterways connecting...
an gas supplies).
Impact
All IEAInternational Energy Agency
The International Energy Agency is a Paris-based autonomous intergovernmental organization established in the framework of the Organisation for Economic Co-operation and Development in 1974 in the wake of the 1973 oil crisis...
member countries who are net oil importers have legal obligation to hold emergency oil reserves, which is equivalent to at least 90 days of net oil imports of the previous year. Furthermore, under the EU regulations there is obligation to hold reserves equivalent to 90 days of consumption, so unlike the gas dispute with Ukraine in 2006, consumers were not affected. Poland had an 80-day oil reserve. The Czech Republic reported drawing oil from its 100 day reserves. Had the dispute prolonged, it is likely that alternative supplies would have been secured. International oil prices were not significantly affected.
The involved countries have, however, expressed concerns about the reliability of the Russia-Belarus oil pipeline and Belarus as an oil middleman supplier.
The events have also provoked renewed discussion on the government policy of phasing out nuclear power in Germany
Nuclear power in Germany
Nuclear power in Germany accounted for 23% of national electricity consumption, before the permanent shutdown of 8 plants in March 2011. German nuclear power began with research reactors in the 1950s and 1960s with the first commercial plant coming online in 1969...
.
Reaction
The European UnionEuropean Union
The European Union is an economic and political union of 27 independent member states which are located primarily in Europe. The EU traces its origins from the European Coal and Steel Community and the European Economic Community , formed by six countries in 1958...
has demanded an "urgent and detailed" explanation, according to a spokesman for Energy Commissioner Andris Piebalgs
Andris Piebalgs
Andris Piebalgs is a Latvian politician and diplomat, currently serving as European Commissioner for Development at the European Commission. Between 2004 and 2010 he served as Commissioner for Energy.-Career:...
.
Piotr Naimski, Poland
Poland
Poland , officially the Republic of Poland , is a country in Central Europe bordered by Germany to the west; the Czech Republic and Slovakia to the south; Ukraine, Belarus and Lithuania to the east; and the Baltic Sea and Kaliningrad Oblast, a Russian exclave, to the north...
's deputy economics minister who is responsible for energy security
Energy security
Energy security is a term for an association between national security and the availability of natural resources for energy consumption. Access to cheap energy has become essential to the functioning of modern economies. However, the uneven distribution of energy supplies among countries has led...
, stated "This shows 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."
German Economy Minister Michael Glos
Michael Glos
Michael Glos is a German politician who served as Minister for Economics and Technology from November 22, 2005, until February 10, 2009....
stated that the dispute showed that "one-side dependencies must not be allowed to develop."
Following a meeting with European Commission
European Commission
The European Commission is the executive body of the European Union. The body is responsible for proposing legislation, implementing decisions, upholding the Union's treaties and the general day-to-day running of the Union....
President José Manuel Barroso in Berlin
Berlin
Berlin is the capital city of Germany and is one of the 16 states of Germany. With a population of 3.45 million people, Berlin is Germany's largest city. It is the second most populous city proper and the seventh most populous urban area in the European Union...
, German Chancellor Angela Merkel
Angela Merkel
Angela Dorothea Merkel is the current Chancellor of Germany . Merkel, elected to the Bundestag from Mecklenburg-Vorpommern, has been the chairwoman of the Christian Democratic Union since 2000, and chairwoman of the CDU-CSU parliamentary coalition from 2002 to 2005.From 2005 to 2009 she led a...
condemned the action, stating "It is not acceptable when there are no consultations about such actions". Commenting on the importance of trust in energy security, she said "That always destroys trust and no trusting, undisturbed cooperation can be built on that." Merkel continued by saying "We will certainly say to our Russian partners but also to Belarus that such consultations are the minimum when there are problems, and I think that that must become normality, as it would be within the European Union." Barroso said that "while there is no immediate risk to supplies, it is not acceptable" for such actions to be undertaken without prior consultation.
See also
- Foreign relations of Russia towards Belarus
- 2004 Russia–Belarus gas dispute2004 Russia–Belarus gas dispute2004 Russia–Belarus gas dispute was a commercial and diplomatic dispute between Russia and Belarus that escalated in January 2004. Close relations between the two countries and willingness for political integration had made it possible for Belarus to purchase gas from Russia at heavily discounted...
- Russia-Ukraine gas disputeRussia-Ukraine gas disputeThe Russia–Ukraine gas disputes refer to a number of disputes between Ukrainian oil and gas company Naftogaz Ukrainy and Russian gas supplier Gazprom over natural gas supplies, prices, and debts...
- Energy crisisEnergy crisisAn energy crisis is any great bottleneck in the supply of energy resources to an economy. In popular literature though, it often refers to one of the energy sources used at a certain time and place, particularly those that supply national electricity grids or serve as fuel for vehicles...
- Nord Stream, an upcoming pipeline aimed at bypassing transit countries.
- Energy Charter TreatyEnergy Charter TreatyThe Energy Charter Treaty is an international agreement which provides a multilateral framework for energy trade, transit and investments...
, including principles for energy trade and transit which Russia is refusing to ratify. - Energy policy of RussiaEnergy policy of RussiaThe Energy policy of Russia is contained in an Energy Strategy document, which sets out policy for the period up to 2020. In 2000 the Russian government approved the main provisions of the Russian energy strategy to 2020, and in 2003 the new Russian energy strategy was confirmed by the government...
- Energy policy of the European UnionEnergy policy of the European UnionAlthough the European Union has legislated in the area of energy policy for many years, and evolved out of the European Coal and Steel Community, the concept of introducing a mandatory and comprehensive European energy policy was only approved at the meeting of the European Council on 27 October...
External links
- Transneft, Russian state owned pipeline monopoly.
- Beltransgaz, Belarusian gas pipeline company.