Russia-Belarus oil feud ripples through Europe

Times Staff Writer

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.

Russia says its increases amount to prices that are still lower than half those charged in Western Europe. It says its energy giant Gazprom and other state-owned corporations have been held hostage by transit countries such as Belarus that are resisting higher prices by threatening to disrupt pipelines.

Amid the Belarus-Russian dispute, German Chancellor Angela Merkel advocated the development of renewable energy sources and reconsideration of a plan to phase out the country's nuclear power plants by 2020. Opposition to nuclear power helped define the Green Party; a push to save the plants could paralyze Merkel's fragile coalition government.

"This is a divisive issue," Kemfert said. "The coalition doesn't even want to talk about it."

Berlin also has resurrected a plan to build a shipping terminal in Wilhelmshaven to import liquid gas from Norway and Qatar. The port is scheduled to be completed in 2010 and is expected to reduce Germany's reliance on natural gas from Russia. Another natural gas option is a planned pipeline through the Balkans and Turkey to link Europe with Middle Eastern and Central Asian suppliers.

But Berlin is also strengthening energy bonds with Moscow. German corporations have joined Gazprom in constructing a natural gas pipeline under the Baltic Sea to Germany. The $5-billion project, expected to be completed in 2010, will skirt former Soviet republics, reducing the likelihood of fuel disruptions sparked by political turmoil between Russia and its neighbors.

jeffrey.fleishman@latimes.com

Times staff writers Maria De Cristofaro in Rome and Achrene Sicakyuz in Paris contributed to this report.

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