Russia, Belarus Seek Resolution to Spat Over 2020 Oil Supplies

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(Bloomberg) -- Russia and Belarus are making progress toward resolving their dispute over oil supplies next year after their leaders held talks to break the impasse.

A series of calls between the countries this week signaled a possible understanding that would keep oil flowing from Jan. 1. At stake are Russian crude deliveries to Belarus totaling 24 million tons a year, and an uncertain impact on transit volumes -- supplies passing through the country en route to Europe.

Russian President Vladimir Putin and his Belarusian counterpart Alexander Lukashenko have spoken twice by phone this week in an effort to reach an agreement. On Monday, they agreed to instruct their governments to work out the details so that contracts could be signed by Jan. 1, according to a statement on Lukashenko’s official website, though no accord has yet been announced. The dispute underlines threats to bilateral ties, which have been strained as Russia seeks a closer trade and political union.

Following another phone call with Putin on Tuesday, Lukashenko asked his government to conclude talks with Russia within hours and sign the contracts, according to a different statement. He also gave orders to “ensure oil deliveries from alternative suppliers.”

Lukashenko and Russian Prime Minister Dmitry Medvedev reached an agreement on the organization of concrete work on shipments,” state-owned news agency Belta reported Tuesday afternoon, citing the Belarusian president.

Transit Fee

Disagreements center on transit fees and the volume of oil to be supplied to Belarusian refineries. Of the 24 million tons that Russia supplies annually to Belarus, 18 million tons go to the nation’s processing plants, while the rest is re-exported, bringing in additional revenue to Belarus’s budget in the form of export duties. Belarus’s right to re-export ends this year.

“Agreements haven’t been reached,” Kremlin spokesman Dmitry Peskov said on a conference call when asked about a possible halt in supplies to Belarus. But he warned against exaggerating the risks, saying: “I suggest we don’t discuss apocalyptic scenarios.”

Reuters reported earlier on Tuesday that Russia may stop oil shipments to Belarus as talks stall on terms. A suspension of supplies would mean more volumes of Urals crude are exported via other routes, in particular from Baltic ports, the news service reported, citing people it didn’t identify.

If agreements aren’t reached on Tuesday, the Russian and Belarusian governments will have to devise a “compromise interim arrangement” to ensure continued shipments, according to the Belarus statement. A more permanent solution can then be worked out by both presidents in mid-January, it said.

Frantic Discussions

The oil talks follow a similar pattern of frantic end-of-year discussions that have characterized Russian negotiations with another neighbor, Ukraine, over natural gas transit agreements.

Last week, Lukashenko threatened to reverse oil flows on Belarus’s section of the Druzhba pipeline if Russia continued to raise crude prices for the country. That would leave Russia with only a third of its export capacity to Europe via Druzhba, he told Echo Moskvy radio station.

Ties have also been tested by the Belarus’s Defense Ministry’s desire to discuss possible peacekeeping drills with NATO, according to Russia’s Tass news agency. In the past, Minsk has often sought to highlight closer ties with the West when Russia has stepped up the pressure in talks with Belarus.

©2020 Bloomberg L.P.

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