The Moscow Times
August 8, 2007
President Vladimir Putin has branded as parasites the energy transit states that have benefited from shipping fees and cheap Russian energy and said Russia should stop subsidizing them.
Analysts have predicted that relations will remain tense as Russia pursues an assertive foreign policy, in part to impress a domestic audience ahead of elections. This is balanced by concern it could give the impression to Western Europe that it cannot be relied upon for secure supplies.
About 80 percent of Russia’s gas exports to Europe pass through Ukraine.
Ukraine has long haggled over how much it pays Russia for gas, but the row came to world attention in January 2006, when it led Gazprom to halt supplies to Ukraine. As a result, exports to Europe, which relies on Russia for 25 percent of its gas, were also affected.
The dispute was solved by Ukraine agreeing to pay roughly double for its gas. Russia has made clear its strategy of trying to buy into infrastructure in transit states, but Ukraine has balked at the prospect. This year, Ukraine’s parliament passed a law to ban the privatization, sale or lease of its gas pipelines.
For its part, Russia has proposed building the Nord Stream pipeline to Europe, bypassing Ukraine.
About 20 percent of Russia’s gas exports to Europe flow through Belarus.
The Druzhba pipeline, which passes through Ukraine and Belarus, supplies Europe with about one-tenth of its oil.
During a pricing dispute with Russia in January, oil shipments through Belarus were halted for three days.
Belarus has also clashed with Moscow over the price it pays for its gas and last week warded off a Russian threat to halt supplies by paying a first installment of its unpaid gas bill.
After a separate dispute in January, the two sides agreed that Gazprom would pay $2.5 billion to buy 50 percent of the state-run Belarussian firm Beltransgaz, which controls the country’s local pipeline network. Gazprom already owned all of Belarus’ transit pipelines.
Following various disagreements with Russia, Turkey has looked to diversify its import sources and has ambitions to be an energy hub, rather than a transit nation for Russia.
Turkey’s Botas is part of a consortium led by Austria’s OMV to build the Nabucco pipeline, which would transport gas from the Caspian and Central Asia, reducing dependence on Russia.
Currently, the Blue Stream natural gas pipeline connects the Russian system to Turkey.
Russia, together with Italian oil company Eni, has a project to extend the Blue Stream pipeline to southern Europe through Turkey.
It has also announced a 50/50 joint venture with Eni, known as South Stream, which would bypass Turkey.
The Baltic states of Estonia, Latvia and Lithuania serve as a vital transit location for Russian oil exports. The Russian crude oil pipeline system is connected to three ports on the Baltic Sea — Latvia’s port of Ventspils, Lithuania’s port of Butinge and the Russian port of Primorsk.
Smaller quantities of crude oil and significant quantities of oil products are also distributed by rail to other Baltic ports, such as Tallinn in Estonia.
Russian oil firms have been shipping 25 million tons of refined oil products per year, a quarter of their exports, via Estonia, but volumes have fallen this year following a bitter dispute with Moscow.
Shipments of other commodities, including metals and coal, through Estonia have also been reduced.
Relations deteriorated after Estonia in April moved a memorial to World War II Red Army soldiers from a site in the city center to a military center, triggering two nights of riots by local Russia speakers.
Last year Russia shut the pipeline to Lithuania’s Mazeikiu refinery.
Analysts have linked the oil stoppage to Lithuania’s decision to allow Polish company PKN Orlen to buy the refinery in which several Russian firms were interested.
In 2003, Russia closed an oil pipeline to Latvia’s Ventspils oil terminal. Russian officials have said Ventspils had little hope of recovering its crude supplies following Russia’s expansion of Primorsk.
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