Byelorussia - now it's an EU / Russian oil war - Happy Christmas

Having been forced to settle to pay more from New Year's Day on January 1st, for Russian gas from Gazprom, it was reported earlier today that Byelorussians have chosen Christmas Day to cut off oil flows from Russia to Poland and Germany, on the pretext of demanding a "transit tax" of $45 per metric ton of oil going through Byelorussian territory.

The Polish segment of the Druzhba(Drushba)pipeline carries about 50 million tons of oil a year, including 96 percent of Poland's oil. About 27 million tons goes to German refiners such as PCK Raffinerie GmbH and Total Raffinerie Mitteldeutschland GmbH. Germany imports about 100 million tons of crude a year.

Apparently as previously reported ,Belneftekhim, the Belarussian oil pipeline operator,did not make the decision to reduce supplies, this was done by Transneft due to Byelorussia stealing oil destined for Europe.

As today is a public holiday in Russia (The Orthodox Churches and their 150 Mn followers of Jerusalem, Russia, Macedonia, Serbia, Georgia, Ukraine, use the Julian calendar on which Christmas Day falls on Jan 7th in the Gregorian calendar) news organisation could not easily obtain any official comment. (Pic - Prince Edward Island Unkraines tucking in to Chrsitmas Dinner this weekend)

However Russia's Deputy Economy Minister Andrei Sharonov told Echo Moskvy radio of ``illegal taxes"on Russian oil exports in a move that ``smells of a trade war,'' Talks with Belarus on renewing oil shipments will begin only after the taxes are abolished, he said.

Now (Novosti) Semyon Vainshtok, the head of Transneft, says From January 6, Belarus began tapping oil destined only for customers in western Europe from the Druzhba pipeline unilaterally, without any warning,"

He said Belarus siphoned off 900 metric tons of oil in the past 24 hours alone. "In all, 79,000 metric tons of oil has been tapped since January 6." He said. he went on Russia's NTV television to claim "Belarus cancelled the signed contracts on oil supplies to its own oil refineries for January. Why? Because they assumed they will make taps, unauthorized taps [of Russian oil] - this is how diplomats call what the Belarusian side is doing,"

In Germany Economy Minister Michael Glos, current chairman of the European Union Energy Ministers' Council, sounded relaxed , although viewing the affair with ``concern.'' he went on to say ``I expect efforts to be made to restore delivery through the pipeline at full volume as soon as possible,'' Glos said in a faxed statement to Bloomberg. The situation in Germany is ``not dramatic'' and refiners have enough crude ``to ensure deliveries even during stoppages of a longer nature,'' he said.

About 27 million tonsof Russian oil transits the affected pipeline onwards from Plock to German refiners such as PCK Raffinerie GmbH on the German Polish border at Scwhedt (although it can take supplies from the Baltic seaport of Rostock) supplying domestic highly refined low sulphur road and jetfuels.(see map) Total Raffinerie Mitteldeutschland GmbH (capacity 11 MN tonnes per annum, largest (2.6BN Euros)is the biggest French investment in Germany. They can take oil from Danzig seaport on the Baltic.

Although Poland has 60 days of oil reserves the action by Byelorussia has cut off direct pipeline shipments to Poland's two biggest refineries, PKN Orlen SA and Grupa Lotos SA in Gdansk (which processes 6 Mn tonnes per annum). Orlen's main refinery in Plock, central Poland, continues to operate at full capacity and its Polish refineries can be fully supplied by sea although Lota has only 2 weeks of immediate reserves.

PK Orlen are Central Europe’s largest downstream oil company - they recently purchased (their biggest ever) a total of 84.36% shares from Yukos International UK B.V. (Yukos) and the Lithuanian Government, paying US$ 2.34 billion for strategic stake in the Lithuanian company AB Mažeikių Nafta (MN) followed in December by 58 filling stations in Northern Germany from Deutsche BP AG.

Elswehere Industry Ministry spokesman Tomas Bartovsky of the Czech Republic said they experienced a ``short disruption'' that was covered by reserves from Slovakia and deliveries to the country ``are in no danger.''

Slovakia's Economy Ministry said supplies haven't been interrupted. Slovnaft AS, the Slovak refinerybased in Bratislava and controlled by Hungarian oil company Mol, will release a statement later today. Slovnaft co-incidentally have just today been informed by Alexandra Bernáthová of the Slovak Antimonopoly Office (PMÚ)of a a fine they are imposingof Sk 300 million (Kč 240 million/€ 8.7 million) because the refinery acted in a discriminatory way in setting discounts or extra charges for prices in the sale of its products. Slovnaft charged Royal Dutch Shell a higher wholesale price than its Austrian rival OMV had to pay - which Slovnaft contest - but then they would say that wouldn't they ?

Hungarian Economy Minister Janos Koka said Mol Rt., Hungary's biggest refiner, had experienced a drop in Russian crude supplies which may be halted by the end of the day, forcing it to tap reserves and find other supplies. The country is ready to use its reserves and start shipments via a pipeline from the Adriatic Sea.

No doubt the position will become clearer - but it highlights (yet again) the precarious nature of supplies to Europe of prime energy supplies.

Footnote

Christmas brings extra security to the streets of Moscow. The city deployed 9,000 policemen on the night of the Vigil and all Sunday... as fastingand abstinence has been observed for 40 nights since November 28th and things tend to get a bit high spirited - hence the empty offices today. President Putin said in a national address..."This feast brings joy and hope to millions of people and unites us around traditional moral values, reinforcing the moral foundations and harmony in society,' and urged Russians to look to the future with 'hope."

Pope Benedict XVI hailed 'our beloved brothers and sisters of the eastern Churches' and 'with affection' wished them 'abundance of peace and Christian prosperity.'

Spraznikom!

Guradian Monday 6.30 pm Russian-Belarus oil row rattles EU nerves
Reports on Channel 4.