For Russia, true friendship is a pipe dream

The legendary Marshal Winter who defeated Napoleon Bonaparte and Adolf Hitler and forced their eventual destruction has been unseasonably mild-tempered this year, allowing Russian President Vladimir Putin to withstand a rain of arrows from the German Chancellery, the European Union, and the Poles and demonstrate that energy supply for Europe can’t be extracted from Russia by pressure tactics, or stealing.

The Druzhba (Friendship) Pipeline will now resume deliveries of crude oil for friends. The lesson of the week-long conflict, which

had The Financial Times thundering in London about Russian perfidy, is that Druzhba is not open to enemies.
Of the 60 million tonnes per annum (1.2 million barrels per day) of crude Transneft has annually piped through Druzhba across Belarus, about 20 million tonnes (384,000 barrels per day) went to the Belarusian refineries, and almost a million barrels went on to central European destinations. The most hostile of them, Poland, has tried rattling trade threats against Moscow for months, but failed to draw European Union support for anything tougher than jawboning from Andris Piebalgs; he has been the EU’s energy commissioner since 2004, and was once a Latvian schoolteacher.

A cut in Russian output at the wellhead had been forecast if the conflict continued; last year’s Russian production averaged 9.7 million barrels daily. The new uncertainty follows reports of a 3% decline in Russian crude-oil production in December. The international oil market did not believe Lukashenko would, or could, hold out against Putin; and the temporary cutoff in pipeline deliveries failed to stop the oil marker price falling throughout this week.

Putin’s deal nicely saves his oil constituents, Russia’s oil companies, all of which use the Druzhba pipeline route to export markets, and which would be obliged to pay the proposed new oil-export duty or suffer the loss of the export route. Industry estimates in Moscow have calculated that the shutdown, which began on Monday and was likely to end on Friday or Saturday, has been costing the Russian exporters $25 per barrel in export netbacks, and $7.5 a barrel in net loss. Surgutneftegas is the exporter most affected, with almost $3 million in losses calculated for the week.

Asia Times