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John Daly

John Daly

Dr. John C.K. Daly is the chief analyst for Oilprice.com, Dr. Daly received his Ph.D. in 1986 from the School of Slavonic and East European…

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Belarus Tightens Energy Ties with Venezuela Following 20 Years of Gazprom Bullying

In 1961, the USSR’s placement of ballistic missiles in Cuba ignited a missile crisis that brought the world to the brink of nuclear conflict.

Fifty years later, the last four years have seen a Latin American nation coming to the aid of a former Soviet republic.

How times have changed.

On 16 November private news agency Belaruskaia Informatsyinaia Kampania BELAPAN, a counterpoint to the official Belaruskaia Telegrafnae Agenstva reported from the capital Minsk that since the beginning of 2011, 11 tankers laden with crude oil from Venezuela have arrived in neighboring oil port Muuga, with each of them delivering roughly 80,000 tons of oil apiece.  According to Port of Tallinn public relations manager Sven Ratassepp, whose organization oversees Muuga, since beginning of the year Venezuelan tanker shipments have delivered roughly one million tons of oil for transshipment to Belarus.

But the arrangement is apparently ad hoc, as according to Ratassepp, "There has been no long-term contract for handling oil shipments to Belarus and it is not known whether and when such a contract will be signed."

Wait a minute!

Isn’t Belarus next door to the Russian Federation, currently vying with Saudi Arabia for the title of the world’s top oil producer?

Yep.

But the administration of Belarusian President Oleksandr Lukashenka, while grateful for Venezuelan crude, has apparently grown tired of its interminable wrangles with Moscow over the issue of energy imports and transportation, which have been going on for nearly 20 years and which under the administration of Russian Prime Minister Vladimir Putin intensified.

In the energy-poor former western republics of the USSR, their extensive pipeline networks, particularly those of Ukraine and Belarus were developed by the Soviet Union beginning in the mid-1970s not only to supply their indigenous needs but to transmit Soviet gas to the burgeoning markets of Europe. After the 1991 collapse of the USSR, the pipeline networks in the newly independent former Soviet republics became the target of acquisition efforts by Russian state natural gas monopoly Gazprom.

For years Belarus stoutly resisted efforts by Gazprom to acquire its Beltransgaz natural gas pipeline network in return for canceling its natural gas debts. In the wake of Minsk’s obdurate refusals, Gazprom simply repeatedly incrementally hiked prices, the same tactic it pursued with Ukraine.

Helping to prop up the Belarus energy infrastructure in the interim was Venezuela, which in 2007 began to invest in the country’s energy industry and ship oil to the beleaguered state, establishing the joint venture Petrolera BeloVenezolana.

Finally, last July, despite the fraternal support from Venezuela the Belarusian government threw in the towel and Prime Minister Mikhail Myasnikovich stated that Minsk was willing to sell the Beltransgaz pipeline network to Gazprom.

The reason? The crushing debt, even at subsidized prices, owed by Belarus for Gazprom natural gas shipments.

But Minsk hasn’t given up on energy cooperation with Venezuela. Last month Belarusian state oil company Belarusnafta, which holds a 40 percent share in Petrolera BeloVenezolana, stated that the company is hoping to increase its annual production to 1.5 million tons of oil in 2012 in Venezuela’s Lake Maracaibo, which will bring the total number of oil deposits under the control of Petrolera BeloVenezolana to nine. Following the signing of a bilateral agreement Venezuelan President Hugo Chavez said, "We have come a long way with Belarus in just two years. We are developing various fields and the joint venture Petrolera BeloVenezolana is now producing about 20,000 barrels of oil per day. With our agreement we will expand operations to other fields in the east and west and increase production to 30,000 barrels per day."

But remove energy from the Belarus-Russian equation, and the Lukashenka administration is still willing to work with Moscow. On 18 November the Russian government issued a press release stating that Prime Minister Putin, Kazakh President Nursultan Nazarbayev and Lukashenka had signed a package of agreements aimed at moving the former Soviet republics closer together, including the one about the creation of the Eurasian Economic Union (EEU) by 2015.  Russian President Dmitry Medvedev said, "We have made another powerful move toward creation of the Eurasian Economic Union, which undoubtedly will define the future of our countries," thanking Nazabayev, who first broached the idea of the EEU in the 1990s and Lukashenka, who convened the meeting.

Belarus is the economic basket case of the trio. Putting a positive spin on the union declaration Lukashenko said, "We clearly stated that we are not losing sovereignty,"

But in the meantime, Venezuelan oil serves Belarus energy needs as well as Siberian light crude.

By. John C. K. Daly of Oilprice.com




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