Europe Wary of Oil & Gas Supply Cuts as Russian Dispute with Belarus Escalates

As the trade and diplomatic dispute between Russia and Belarus continues, started by the arrest of a Russian businessman, Russia has decided to pile more pressure on the former Soviet ally by banning all pork imports from Belarus.

On Monday, Vladislav Baumgertner was arrested at the airport outside of Minsk, having been invited to the country for talks with the Belarussian prime minister. Baumgertner is the head of the Russian potash company Uralkali, which was part of a Russia-Belarus potash sales cartel which recently collapsed.

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Since his arrest, Russia has cut oil supplies to Belarus by 25% and have threatened to keep the cut in place for several months. The cuts could pose a threat to Belarus, whose struggling economy, as a transit country from Russia to Europe, is reliant on Russian oil and gas supplies.

Timothy Ash, an analyst at Standard Bank London, told Reuters that “relations between Russia and Belarus seem to be delving to new lows and the expectation is that Russia will further ratchet up pressure on its neighbour via the trade channel.”

All problems stem from the joint venture between Uralkali and the Belarussian state potash producer Belaruskali, which controlled two fifths of the $20 billion global potash market, and which collapsed earlier this month.

The break-up has caused big problems for Belaruskali, which has had to suspend operations at two of its four potash mining facilities. Any significant fall in output could damage Belarus’s economy, which is reliant on exports of soil nutrients for 12% of state revenue and around 10% of total export income.

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Belarus has arrested Baumgertner on charges of abuse of authority, and officials are also after Suleiman Kerimov, Uralkali’s largest shareholder and another friend of the Kremlin.

President Vladimir Putin has not made any public statements about the dispute, but his foreign policy advisor, Yuri Ushakov, said that they expect Belarus to free Baumgertner quickly, and assured that the dispute was purely commercial, not political.

Russia is already in a dispute with Ukraine, another vital transit country for Russian oil and gas heading to the European market. Europe is closely watching these situations, fearing a cut in supplies, which have occurred in the past as a result of disagreements between Russia and Belarus and Ukraine.

By. Joao Peixe of Oilprice.com