Translated material
Because of my dad - into hell
Alexander Lukashenko left Europe without Russian oil
Exactly a year after the gas war broke out between Russia and Ukraine, Moscow was forced to get involved in the next war. But if the first war , which took place in an extremely frosty winter, was quickly completed with the signing of a peace agreement between Moscow and Kiev on the third night of January, then the current scandalously warm winter, on the contrary, foreshadows deep “freezes” in relations between Moscow and Minsk .As befits one on the eve of a decisive battle, the Russian commander-in-chief, President Putin, convened a “military council” yesterday. A few hours before the start of negotiations with the Belarusian delegation that arrived in Moscow, Putin convened a meeting of his government. Obviously, his main goal was to develop those limits in negotiating positions with Minsk to which Moscow can retreat without losing its face and financial interests in an effort to ensure reliable fulfillment of Russia’s contractual obligations for oil supplies to Western Europe. This essentially contradictory task can be expressed in one phrase from Putin addressed to Prime Minister Mikhail Fradkov: “It is necessary to discuss with Russian oil companies the possibility of reducing oil production in connection with the problems that arose during transit through the territory of Belarus. Everything must be done to ensure the interests of Western consumers.”
Obviously, Putin was forced to take the risk of being accused of exerting state pressure on private Russian oil companies, in other words, to question the market nature of the Russian economy, because of the severe need to demonstrate to Minsk Moscow’s inflexible position.
The history of oil relations between Moscow and Minsk goes back to 1995, when Russia and its neighbors formed the Customs Union. Then it was decided, as Minister of Industry and Energy Viktor Khristenko said yesterday, to equate the operating conditions of Belarusian refineries to the conditions in which Russian factories operate. That is, cancel the export duty on the oil supplied to them, and divide the duty on the export of petroleum products in the ratio 85:15 (85% in favor of Russia). However, in 2001, Belarus, as Mr. Khristenko says, unilaterally withdrew from this agreement . Since then, negotiations on the need to comply with the division of duties on petroleum products have proceeded at a sluggish pace . However, last year they became more active. The price of the issue for Russian companies , according to the minister’s calculations, is more than $1 billion. It is as follows. If petroleum products exported to Europe through Belarus were supplied directly from Russia, then the Russian budget would have received $1.7 billion at the end of last year. However, given that the export duty on petroleum products in Belarus is lower, the Belarusian budget received $600 million This is why Belarus began to be called an offshore, says Mr. Khristenko.
But this could not continue; Russia no longer intends to subsidize Belarus and is trying to establish for it the same rules under which it works with the rest of the CIS countries. “It’s inconvenient to address a lady as “chick” all the time in public; I still want to say “lady, madam,” to address everyone the same way,” Mr. Khristenko said figuratively. Therefore, after Minsk refused to agree on the division of export duties on petroleum products, an oil export duty was introduced for Russian companies supplying it to Belarus. This became the starting point in the oil and gas confrontation between Moscow and Minsk.
Mr. Khristenko pointed out that when Gazprom agreed on the price of gas for Belarus two minutes before the New Year , no one knew that in Minsk a decision had already been made to introduce duties (not transport duties) for oil transit . “We learned about this after the New Year, reading on the official website of the Belarusian government,” admitted the Russian minister. And at one in the morning on January 7, when no one paid this duty, the Belarusian side, according to Mr. Khristenko, began to close the valve, while about 80 thousand tons were illegally seized. In order not to disrupt the operation of the system, the Russian Transneft was forced to stop pumping oil into the Druzhba oil pipeline. On the day of November 7, the system resumed operation, but at night on January 8 it stopped again. Since then, producing companies and Transneft have been pumping oil into storage facilities, but their volumes, according to experts, will last a maximum of a week and a half.
According to Mr. Khristenko, Transneft yesterday filed a corresponding lawsuit in the Belarusian court, since Belneftekhim enterprises violated a number of international agreements and corporate agreements. Similar claims, in his opinion, will be filed by Western companies - oil buyers. But, according to him, the volume of deliveries through Druzhba is quite serious, and therefore “the situation requires resolution not only and not so much by the judicial authorities.”
The delegation from Minsk, headed by Deputy Prime Minister Andrei Kobyakov, arrived in Moscow yesterday and did not even begin negotiations. As Minister of Economic Development and Trade German Gref said, at the meeting (and it took place after Putin’s meeting with the Cabinet of Ministers) Russia’s position was only stated: negotiations will not begin until the duty for oil transit through the Druzhba oil pipeline across the territory is abolished Belarus, which Moscow considers “illegitimate and unprecedented.” “We ask to return to the international legal space,” he said. - And after that we are ready to look for acceptable ways out of the current situation. We parted on a positive note. We are ready for the most positive dialogue, but now the situation is in the hands of our partners.”
Putin's words about the “possibility of cutting oil production” should be understood as the most extreme application of a hard-line approach to negotiations. Moscow warns that it will stop at nothing to defend its interests. Demonstrating this “stick”, the Kremlin yesterday did everything to remind that there are no more “carrots” for Minsk in its bins. Putin spoke in detail, perhaps even in too much detail, about well-known things. The fact that Belarus buys Russian gas at the cheapest prices in the CIS ($100 per thousand cubic meters), that Russia does not charge an export duty when exporting gas to Belarus, that Russia’s total losses from the margin in gas prices between market and current and from non-collection of duties amount to $3.33 billion, which is what Russia will pay during the 4-year transition period necessary for Minsk to transfer its economy to a market economy.
These arguments are well known in Minsk, but have absolutely no impact on the Belarusian leadership. The head of the Ministry of Industry and Energy, Viktor Khristenko, spoke on this topic on the verge of a foul last night: “Still, I believe in common sense and I think there are no situations in which it does not have the right to triumph, with the exception, of course, of pathology.” “But this is not for me,” said Khristenko, “this needs to be done for the Ministry of Health.”
It is obvious that Moscow’s unflattering assessment of the behavior of the other side in the negotiations is also based on the reaction of the West, which is the “suffering” side in this war. The first country to suffer from the suspension of Russian oil transit was Poland. However, Polish Prime Minister Jaroslaw Kaczynski does not believe that the crisis caused by this is dangerous; Warsaw views it as a “serious warning.” “We can replenish the missing supplies,” Kaczynski said yesterday.
Nevertheless, delaying the resolution of the issue of oil transit through Belarus will seriously harm the interests of oil workers - both Russian and European. According to the Minister of Industry and Energy Viktor Khristenko, the Druzhba oil pipeline transports more than 81 million tons of oil per year (17% of all Russian production): 30 million tons in the Gomel direction (and further to Ukraine and Poland) and 51 million tons in the Novopolotsk direction to Poland and Germany. Thus, Ukraine was cut off from oil supplies by pipeline transport. The main victims of the interruption of supplies are LUKOIL, TNK-BP, Surgutneftegaz, Rosneft and Gazprom Neft. All of them yesterday called on the authorities of Russia and Belarus to quickly come to an agreement and resume pumping. “The situation is abnormal, it needs to be resolved at the interstate level as soon as possible,” said LUKOIL press secretary Dmitry Dolgov. “As practice shows (in particular, the situation after the July accident at the Druzhba oil pipeline), the suspension of oil transit for several days is not critical for oil companies, since once the situation normalizes, they can pump up the required volumes,” the company believes. “The situation will become critical if the resolution of the issue drags on for more than a week.” And TNK-BP told Vremya Novostei that the company, due to the stoppage of oil transit via the Druzhba oil pipeline, cannot load two ships - one in the port of Gdansk (Novopolotsk direction) and one in the port of Yuzhny (Gomel direction). “We are now discussing with buyers what to do: maybe change the loading port, maybe move the date,” says a representative of the Anglo-Russian holding. “In either case, significant damage is possible.” Rosneft is also talking about the possibility of significant damage.
Mr. Khristenko said yesterday that it is impossible to quickly transfer significant volumes of oil to other export destinations. “In the short term, it is only possible to replace the mode of transport - the use of rail and river during the navigation period; in addition, it is possible to increase the load on Russian oil refineries and the volume of exports of petroleum products,” he said. “If this is not enough, then there is a threat of a reduction in oil production - something we have not had in recent years, but may face.” Of course, no company will completely stop production at wells, experts say, but a reduction in production rates is possible.
In the medium term, Mr. Khristenko says, “we need to think about” reducing “transit risk.” The priority measures, in his opinion, could be the expansion of the Baltic pipeline system from the current 65 million tons per year to 110 million tons within two years, as well as the acceleration of the construction of an oil pipeline from Eastern Siberia to the Pacific coast. However, whether the government will discuss these projects, and if so, when, the minister chose not to specify.
Viktor Khristenko argued yesterday that “the situation will affect relations between Russia and the EU in a calm and meaningful way.” “I don’t see any problems, we provide a clear and transparent regime,” said the head of the Ministry of Industry and Energy. However, here he is slightly disingenuous. President of the European Commission Jose Manuel Barroso yesterday in Berlin already expressed displeasure that the decisions taken by Moscow and Minsk were made without consultation with the EU.
The head of the Belarusian analytical center “Strategy” Leonid Zaiko argues that the EU statements will not have a decisive influence on the Belarusian-Russian negotiations, since “what is happening is a political duel between Putin and Lukashenko.” According to the expert, “Europe must decide whether it needs democracy and human rights in Belarus or whether it needs uninterrupted oil transit. Previously, she criticized Moscow for supporting Minsk, but now she is dissatisfied with the refusal of this support.”
“Russia has so many levers of pressure on Belarus that it is difficult to list. It can bring the entire Belarusian economy to its knees. When energy prices rise, the competitiveness of Belarusian goods will sharply decrease,” former speaker of the Belarusian parliament Stanislav Shushkevich told Vremya Novostey. In Moscow yesterday they made it clear that all the “pressure levers” are accounted for and ready for use. Interfax quotes the words of an anonymous government source, who “suggested thinking about the following figures: of exported products produced in Belarus, supplies to Russia are: meat and meat products - 99.9%; milk and dairy products - 97.3%; medicines for retail trade - 56%; wallpaper and similar coverings - 71.8%." And so on, right down to tires and ethylene polymers, shoes and ceramic tiles, gas stoves and refrigerators, televisions, tractors, tractors, trucks and furniture.
However, many oil workers believe that the Russian side will compromise one way or another, although it will agree to it “at the very last moment” (when all storage facilities are filled) - as was the case with contracts for gas supply and transit. The fact is that in this area, experts say, the positions of traders of Russian state-owned companies are very strong. And stopping supplies is unprofitable for them - not only because they will earn less, but also because it will negatively affect the stock prices of the same Rosneft, whose “people's” IPO became almost the main Kremlin project of the past year.