Druzhba is friendship, but tariffs are different
The situation around Russian oil supplies to Europe via the Belarusian section of the Druzhba pipeline looks more and more deadlocked. Minsk proposes to increase the price of transit by 84% from July 1, but Moscow does not agree with this, considering such a step to be economically unjustified. Finding a compromise will also be difficult because Kazakh oil is pumped along the northern branch of Druzhba, respectively, the issue must be coordinated with Astana.
The Druzhba oil pipeline runs from Russia to the Belarusian Mozyr, after which it is divided into two branches. The northern one goes to Poland and Germany, and the southern one goes through Ukraine to the Czech Republic, Slovakia, Hungary and Croatia. Minsk wants to increase the tariff in both directions, and this point is of fundamental importance. In 2021, a total of 35.9 million tons of oil were exported through Druzhba, in 2022 the volumes stayed at about the same level, but this year they fell sharply due to actions from Berlin and Warsaw: by 4 .7 times throughout the Druzhba system, and in the direction of Germany and Poland — 12.1 times the level of the previous year.
In the unscheduled increase in tariffs, Minsk sees an opportunity to compensate for the drop in pumping and achieve breakeven indicators for itself. Meanwhile, as the Russian company Transneft, which is responsible for transit, assures, the Belarusian side (represented by the operator Gomeltransneft Druzhba) did not provide it with a rationale for this initiative — financial and accounting statements for the first quarter, «confirming the occurrence of losses on the transit of oil of Russian origin «. The amount of tariffs should be determined in accordance with the established methodology, according to a letter from Transneft to the Belarusian operator. Earlier, the head of the Russian Ministry of Energy, Nikolai Shulginov, confirmed that Moscow is not satisfied with Minsk's proposal, further discussion of the issue and the determination of an economically justified price are required.
“In February 2023, Belarus has already increased the tariff for oil transportation services through its territory by 9%,” recalls Artem Deev, head of the analytical department at AMarket. — And Transneft has not received from it either a financial report for the first quarter, or information about plans regarding pumping volumes for 2023. In general, the cost of transit through the southern branch of the pipeline is already a quarter higher than through the northern one. That is, the income of the Belarusian side is more than enough for break-even work. And the current tariff policy generally looks like a “cross-subsidization” of expenses.”
Of course, Moscow could meet Minsk halfway, proceeding, so to speak, from common geopolitical interests. But taking into account the not too friendly policy in the energy sector on the part of Belarus, such steps are hardly appropriate. In addition, Deev notes, the issue of compensation for the costs of operating the northern branch of Druzhba should also be discussed with oil senders from Kazakhstan — after all, it is their raw materials that go to Germany along this route. And to become a buffer between Astana and Minsk is clearly out of our hands now.
“Of course, the Belarusians have certain grounds for raising the tariff,” says Igor Yushkov, an expert at the Financial University under the Government of the Russian Federation. “Since transit volumes have drastically decreased, the cost of pumping each ton has increased significantly. Germany abandoned Russian oil in general and Druzhba in particular. And Poland first ended the contract, and then the Russian Federation itself refused to supply it with raw materials. And now the northern branch is used mainly for the transit of oil from Kazakhstan, while the volume of pumping is very small — about 20 thousand tons per month.
In fact, Minsk was faced with a choice: to raise the tariff several times only on the northern branch (where pumping dropped sharply), or to “smear” its growth across both branches. The decision was made in favor of the second option, and this is the root of the contradictions between Minsk and Moscow. The Russian side points to the injustice of this step: they say, why on earth should we pay an increased tariff due to problems with the workload of the northern branch of Druzhba? Moreover, Germany actually nationalized Russian refineries on its territory and refused (together with Poland) to purchase oil from the Russian Federation. It turns out that we must help to load the oil refineries taken from us with raw materials.
“By the way, if we raise the pumping rate along the northern branch, it will become unprofitable for Kazakhstan to pump oil through the Druzhba, and deliveries may turn to Ust-Luga, where the raw materials will be transported by sea, — Yushkov argues. “In the case of the southern route, the higher price is fraught with the fact that the Hungarians, Czechs and Slovaks will think about finding alternative sources of oil.”
Andrey Suzdaltsev, Deputy Dean of the Faculty of World Economy and International Affairs at the National Research University Higher School of Economics, sees a different context in the actions of Minsk. According to him, one must understand the psychology of the highest Belarusian nomenklatura, which is used to solving almost all its problems at the expense of Russia. And today, when revenues from the transit of Russian oil through Druzhba have collapsed (along with the volume of supplies), Minsk sees this as solely Moscow's responsibility, ignoring other circumstances. According to the expert, this is a classic dependency.