Russia & Belarus reach agreement on oil & gas prices

The energy dispute between Russia and Belarus has edged closer to a resolution following an agreement between the two countries on the terms of Russian oil and gas supplies for the next year.

Last week, during a visit to the Belaruskali potash mining company, Belarusian Prime Minister Roman Golovchenko made a statement saying that Minsk has secured an agreement with Moscow with "beneficial terms" on oil and gas deliveries in 2021. 

The details of the agreement have not been disclosed.

Relations between the two countries were somewhat soured during 2020 when the two sides failed to reach an agreement over the terms for the year. Consequently, oil supplies from Russia to Belarus slowed to a trickle, leading the government in Minsk to look for alternative sources of oil and attempt to thaw the lengthy frost that defined its relations with the West.

In 2020, Minsk boosted its imports of crude oil from various other producers including Saudi Arabia, Azerbaijan, Norway and the US.

Last February, Belarusian President Alexander Lukashenko met with US Secretary of State Mike Pompeo in a highly publicised meeting in which Washington offered to supply the former Soviet nation with 100% of its oil and gas needs.

In a further bid to move away from over-dependence on Russian imports, President Lukashenko also announced the development of new Belarusian oil and gas infrastructure, which is set for completion in 2025.

Read more: Nord Stream 2: Construction resumes as Germany mulls sanctions loophole & US demands moratorium

The dispute over oil and gas prices has been ongoing since 2016 despite Gazprom - the world's largest gas producer with 16% of global production - offering Belarus a heavily discounted price in 2017.

According to Mr. Golovchenko, Moscow is still offering a very competitive price to Belarus for its gas. 

"If we talk about the current level of prices on international spot markets, Belarus buys gas virtually at half of the current world prices," Golovchenko told Belarusian TV.

The landlocked country does not possess any domestic oil or gas reserves and as such depends heavily on Russian imports amounting to around 20 billion cubic meters annually. 

Moreover, Belarus - long seen as a close ally of Russia - serves as an important transit route for Russian oil and gas to Europe. Around 20% of Russian gas passes through Belarus on its way to the EU, with the bulk going predominantly to Germany.

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