Belarus cuts off Russian oil to Europe

Germany, Poland, and Lithuania are hit by latest energy dispute between Russia and its neighbors.

For the second time in just over a year, a political squabble between Russia and one of its ex-Soviet neighbors has cut off energy supplies to Europe, triggering anxieties about Moscow's reliability as an economic partner.

On Monday, Russia accused Belarus of shutting down the northern leg of the 2,500-mile-long Druzhba pipeline, which carries up to 2 million barrels of Siberian crude daily to European customers, causing shortages in Poland, Germany, and Lithuania.

The disruption is reminiscent of last year's shutdown of Russian gas supplies to Ukraine, which caused similar energy jitters in Europe. Though Poland and Germany have ample reserves on hand to ride out any temporary squeeze, the dispute underscores increasing concerns about Europe's dependency on Russian energy.

German Chancellor Angela Merkel, whose country assumed the EU and G-8 presidencies on Jan. 1, worried in a weekend TV interview about Moscow's tendency to change prices – and rules – for EU countries that depend on Russia for about a third of their energy supplies.

"Russia was a dependable delivery partner in the past," said Mrs. Merkel, who has made energy security a key priority of Germany's G-8 presidency. "But we are wrestling with Russia right now about strengthening [its energy commitments]. We also need to know that we have reliable prices and reliable cooperation with Russia."

Tit-for-tat energy dispute

The most recent energy scare, which comes amid a deepening rift between the Kremlin and Belarussian leader Alexander Lukashenko over long-stalled plans to reunify the two former Soviet nations, is the latest in a chain of tit-for-tat measures. On Dec. 31, Belarus reluctantly agreed to a doubling in price of Russian gas, to $100 per thousand cubic meters – still well below global market levels of around $250. Belarus also agreed to sell 50 percent of its pipeline network, Beltransgaz, to Russia's gas monopoly Gazprom.

But last week Belarus retaliated by imposing a special $45 transit duty on each metric ton of Russian crude pumped through the Druzhba pipeline, a move Russia has called "illegal." By Monday, Polish officials said no oil was flowing through the line, which carries about a fifth of all Russian crude exports to Europe. Russia accused Belarus of "siphoning the oil off" to meet its own energy needs.

Monday Germany shut down two refineries, in Leuna and Schwedt, though both it and Poland have enough reserves on hand to last at least two months.

"[Europe] is not at any kind of chokepoint, the market can cover a great deal of this if needed," says Ambassador William Ramsay, deputy executive director of the International Energy Agency in Paris. "[there are] a lot of other options to procure energy and gas, by ship and pipeline."

Stalled plans for a 'neo-Soviet' union

Belarus, a heavily industrialized Slavic nation of 10 million, has been Russia's closest ally in the post-Soviet region since Mr. Lukashenko came to power a dozen years ago. Lukashenko and former Russian President Boris Yeltsin drew up a grand plan to join their countries in a neo-Soviet union, but Vladimir Putin has been less enthusiastic. Still, Moscow has repaid Lukashenko's geopolitical loyalty with subsidies estimated at as much as $8 billion annually, in the form of cheap gas, duty-free oil, and favored access to Russian markets for Belarussian industrial goods.

But Lukashenko has been a growing embarrassment to Moscow. Human rights groups accuse him of rigging elections, closing down independent media, and imprisoning dissidents. Experts say Lukashenko has employed Russian subsidies to create a neo-communist welfare state, which tamps down popular discontent but has also become an obstacle to the economic expansion for Russia's industrial conglomerates.

"Russia has been subsidizing Belarus because we thought there was going to be a full alliance between our countries," says Sergei Markov, a Kremlin-connected analyst. "But Lukashenko has been blocking [Russia's goals] and, if that's the way it's going to be, then he should have to pay full market prices for energy."

Regime change in Belarus?

Some Russian experts suggest Mr. Putin may be angling for regime change in Minsk, the Belarussian capital, or at least sweeping revisions in the relationship. "Russia doesn't see any returns on its investments in Belarus," says Gennady Chuffrin, deputy director of the Institute for World Economy and International Relations. "The Kremlin believes it has a strong hand to play and that Lukashenko, a political outcast, has little chance of holding out for long against Russian pressure."

Ariel Cohen, senior research fellow at the Heritage Foundation in Washington, says Russia's and Belarus's behavior is "an example of how high oil prices embolden people to take destabilizing steps. It's what I call the oil chutzpah factor," he says, citing Iran, Venezuela, the Middle East oil embargo of the 1970s, and now Russia.

However, it would be wrong to simply view Russian energy policy as "imperial posturing," counters Rainer Lindner, a Russian expert at Stiftung Wissenschaft und Politik, a foreign affairs think tank in Berlin. "By ditching privileged oil and gas deals with its neighbors and increasing prices, Russia complies with demands of the World Trade Organization [WTO]. The WTO doesn't accept privileged prices of the type that existed between Russia and its neighbors so far."

To safeguard its own energy security, the EU should offer to mediate between Russia and its neighbors, says Dr. Lindner. Germany in particular "has good relations with Russia and should bring these to bear in the interest of the EU's energy security."

But the EU would require Belarus to make reforms, he adds. "The EU doesn't readily accept a regime like Belarus at the negotiating table without conditions. "The message is simple: 'If you want us to moderate, you have to meet certain political standards.' This could effect a kind of regime change there."

Robert Marquand in Paris and Ranty Islam in Berlin contributed.

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