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Russia-Belarus oil feud ripples through Europe

Dispute prompts a look at import options and renewable energy.

January 14, 2007|Jeffrey Fleishman | Times Staff Writer

BERLIN — One turn of a valve can have rippling consequences. The recent oil price dispute between Russia and Belarus has jolted Europe, reviving debates on alternate energy and highlighting the continent's reliance on fuel flowing through the volatile politics enveloping Moscow and the former Soviet republics.

The unfolding scenario is a fascinating game of wily players, big business and diplomacy connected by pipelines and exploration projects. The standoff between Belarus and the Russian pipeline monopoly, Transneft, led to oil disruptions in Poland and Germany. That triggered a shake in financial markets and an immediate jump in the stock of a Norwegian energy company that supplies the region.

The crisis appeared to be resolved at the end of last week, but the unpredictability around it has pushed Europe to reexamine its options. Germany, Poland and the Czech Republic plan to import more natural gas from Norway and Qatar. Italy wants to improve solar power technology. The European Union has proposed cutting oil imports, but has yet to agree on a uniform energy bloc that would reduce Russia's strategic advantage in negotiating with individual nations.

"We need to be more independent from foreign energy supplies," said Guido Westerwelle, chairman of Germany's Free Democratic Party. "[This] would make us freer and less subject to blackmail."

With its geographic proximity and vast natural resources, Russia will remain a prominent European supplier, especially if nations become less reliant on oil from the chaotic Middle East. The question becomes how to deal with a Russia that often appears more authoritarian than democratic and is enmeshed in scandals, such as the poisoning of a former agent and the slaying of a crusading journalist.

The cover of a recent Economist magazine captures Europe's uneasiness about Moscow: President Vladimir V. Putin dressed like a 1930s gangster, brandishing a gas pump like a Tommy gun. The caricature has lingered even as Moscow blamed Minsk for instigating Russia's decision last week to stop oil from flowing through Belarus' Druzhba pipeline.

"Russia is using energy like a weapon, so we have more fears," said Claudia Kemfert, chief of the energy department at the German Institute for Economic Research. "It was a shock to Western Europe in 2006 when Russia shut its pipelines to Ukraine. Now, we're discussing more heavily how to decrease our dependency."

European officials have complained that Russia's energy spats with its neighbors, many of which act as fuel transit countries to the West, are turning Moscow into an untrustworthy partner. The three-day closing of the Belarus pipeline had a minimal effect on Europe's reserves, but it was the second reminder in 12 months that Russia's political whims can influence financial markets and send diplomats aflutter.

"Europe shouldn't depend too much on [fuel] delivery from the East," German Economics Minister Michael Glos said. "A balanced energy mixture of oil, gas, coal, nuclear and renewable energy is indisputable."

The Arctic region, which contains one-fourth of the world's natural gas and oil reserves, is emerging as an attractive alternative. Norwegian companies have begun exploration in the Barents Sea for natural gas that can be liquefied and transported across Europe. Russia, however, remains an unsolved part of the equation: Moscow and Oslo have yet to resolve border differences that have kept Norwegian firms away from stretches of the Barents.

Some analysts suggest that Russia's aggressive energy strategy in Europe is exaggerated, and that Moscow won't let disputes with former Soviet republics sour relations with the West. But the cases of Belarus and Ukraine underscored Russia's inability to impose higher rates on its neighbors without causing short-term disruptions to its European market.

Russia provides 30% of the European Union's imported oil and nearly 40% of its imported natural gas. A new EU study predicts that unless there are shifts to alternative and renewable energy, the continent's imports, much of them coming from Russia, will increase from more than 50% to about 70% by 2030.

"Russia does possess means to use its energy as a weapon, but this term is misleading," said Roland Goetz, a Russia expert with the German Institute for International and Security Affairs. "Energy is a two-sided weapon. If Russia stops gas and oil exports, it will lose income and political credibility, and a good name as a trading partner."

European officials say Russia's energy gambits are largely aimed at punishing new democracies, or in Belarus' case, a defiant autocrat, in former Soviet republics. Russian fuel prices are relatively low in these countries. Recent cost increases in nations such as Ukraine are calculated to disrupt governments and create tension at the eastern edge of the EU, officials say.

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