Russia-Belarus oil dispute begins to threaten supplies to Europe

By Aliaksandr Kudrytski on 2/14/2020

MINSK (Bloomberg) - A long-running oil dispute between Russia and Belarus has for the first time threatened to disrupt supplies to Europe.

Belarus will start taking crude from its transit pipeline if shipments from Russia are below the agreed 2 million tons this month, state news agency Belta reported Friday, citing President Alexander Lukashenko. That could jeopardize Russian flows to the European Union along the giant Druzhba link.

The warning comes amid a pricing disagreement between the two former Soviet republics, with Russian producers curtailing crude supply to the neighboring country this year. A Kremlin official said last week the Russian government can’t force oil companies to supply crude to Belarus at lower prices than they’re prepared to offer.

Russia previously agreed to send Belarus 24 million tons of oil this year. Yet the country only received 500,000 tons in January, a quarter of the expected volume, according to Lukashenko.

“If they don’t ship in February, we will be taking up to 2 million tons” from the pipeline, the president said in Svetlogorsk. He also reiterated the possibility of reversing flows on one section of Druzhba, to send oil from Europe to Belarus rather than from Russia to the EU.

The Druzhba -- or Friendship -- pipeline to western Europe handles about 20% of all Russian crude exports outside the former Soviet Union. It also ships oil from Kazakhstan to Europe.

Lukashenko has vowed to cut his country’s near-total dependence on Russian crude to 40%. Belarus is looking to bring in Saudi, U.A.E. and U.S. oil via Poland. It could also receive crude for its Naftan refinery via Baltic ports, and then sell the output to neighboring Lithuania and Latvia. The nation’s Mozyr refinery could be supplied from the Black Sea and then ship refined products to Ukraine.

Yet it’s a major overhaul of supplies for a country traditionally reliant on its powerful neighbor. As the dispute escalates, Lukashenko has claimed Russia’s leaders are “hinting” he should accept a merger of their two countries in return for getting cheaper oil and gas. The president dismissed such a scenario as unacceptable.

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