Belarus-Russia Oil Dispute: Did Compensation Flow?

Russia and Belarus have had a tumultuous relationship concerning oil and gas supplies, with several disputes over the last decade. In 2019, Russia halted oil supplies to Belarus and Europe via the Druzhba pipeline due to chemical contamination, causing significant losses for Minsk and its oil companies. Russia agreed to compensate Belarus for its refinery losses in 2021, and while it has paid some compensation to other countries, the settlement with Belarus remains unresolved as of 2023, with Belarus expecting $640 million in compensation.

Russia has not compensated Belarus for the 2019 contaminated oil

The head of Belarus' state oil company acknowledged the significant losses incurred by Minsk and its oil transporting companies due to the halt in Russian oil transits. Russia admitted responsibility for shipping contaminated oil to Belarus and other countries via the Druzhba pipeline. However, as of 2020, there was no resolution on compensation for Belarus, with the issue linked to broader disputes between the two countries.

While Russia has compensated companies from Kazakhstan, France, and Hungary, there has been no public announcement regarding compensation for Belarus. Belarus' energy company, Belneftekhim, has sought over $61 million in compensation for the contaminated oil, but no agreement has been reached.

The dispute over contaminated oil is part of a larger context of oil and gas supply disagreements between Russia and Belarus. Russia has made proposals to Belarus regarding oil supply terms, including partial compensation for tax changes that cost Belarus $330 million in 2019. However, no firm agreement has been reached on the terms of oil supplies to Belarus.

In summary, Russia has not compensated Belarus for the 2019 contaminated oil incident, and the issue has been entangled in broader disputes between the two countries. The lack of resolution has impacted Belarusian oil companies, refineries, and the state budget.

Russia has paid compensation to other countries for the contaminated oil

Russia has admitted to sending millions of tonnes of oil contaminated with chlorides to Belarus, Kazakhstan, France, and Hungary. However, as of 2020, it had not compensated Belarus for the contaminated oil, and it is unclear whether it has done so in the time since.

In 2019, Russia discovered that millions of barrels of oil in its pipelines were contaminated with organic chloride. This crisis affected several countries in Europe, including Belarus, Germany, and Poland. The contaminated oil was sent via the Druzhba (Friendship) pipeline, which supplies Germany, Poland, Slovakia, Hungary, and the Czech Republic. The Russian oil pipeline monopoly Transneft denied responsibility for the contamination, claiming that it must have been added by the producers.

Russia has paid some compensation to companies from Kazakhstan, as well as to French energy giant Total and Hungary's MOL. However, there has been no public announcement about any settlement with Belarus. Belarus' energy company Belneftekhim has said it seeks over $61 million in compensation for the 563,000 tonnes of contaminated oil it received.

In 2023, it was reported that Belarus expected to receive $640 million from Russia in 2024 to compensate for losses sustained by its oil refineries. Russia stopped providing discounted oil to Belarus in 2019, resulting in costs of $330 million for Belarus that year. Russia agreed in 2021 to compensate Belarus for these losses on an ongoing basis.

In summary, Russia has compensated some companies in Kazakhstan, France, and Hungary for the contaminated oil it sent in 2019. While Russia has not publicly announced any settlement with Belarus, it has agreed to compensate the country for losses related to the discontinuation of discounted oil in 2019, with payments expected to begin in 2024.

Belarus' energy company Belneftekhim seeks over $61 million in compensation

Russia and Belarus have had a tumultuous relationship when it comes to oil and gas disputes. Belarus depends heavily on Russian energy and serves as a critical transit route for Russian oil and gas exports to Europe. Moscow and Minsk have frequently clashed over pricing, volumes, and political integration.

In 2019, Russia halted oil supplies to Belarus and Europe via the Druzhba pipeline due to chemical contamination in the oil. This disrupted Belarusian oil exports and impacted several European countries, including Germany, Poland, and Slovakia. Russia admitted responsibility for shipping contaminated oil and compensated some companies, but as of 2020, had not reached a settlement with Belarus.

Belarus' energy company Belneftekhim sought over $61 million in compensation for the 563,000 tonnes of contaminated oil received. This translates to $15 per barrel, the highest possible level of compensation promised by the Russian oil pipeline monopoly Transneft. However, there has been no public announcement regarding the settlement with Belarus.

The dispute over compensation is linked to broader issues between the two countries, including oil and gas supplies for the following year. In 2021, Gazprom, a Russian gas giant, initiated discussions with Belarus regarding gas supplies. Russia also agreed in 2021 to compensate Belarus for its losses on an ongoing basis. Belarus expected to receive $640 million from Russia in 2024 to compensate for losses sustained by its oil refineries due to changes in Russian tax policy in 2019.

In addition to seeking compensation from Russia, Belarus has also been involved in disputes with other companies. In 2020, Belarus, through its state petrochemical concern Belneftekhim, sought $84 million in compensation from the Lithuanian company Orlen Lietuva for oil pumped out of the Lithuanian section of the Druzhba pipeline.

Russia and Belarus have a history of energy disputes

In 2004, Russia stopped supplying gas to Belarus, causing the country to run out of gas and start taking volumes from transit pipelines. Russia responded by suspending all transit flows to Europe for one day, and Minsk was forced to sign a new supply deal at higher prices. In 2007, Russia doubled gas export prices for Belarus and imposed a new crude oil export duty. Minsk retaliated by imposing a new oil transit duty, and Moscow suspended deliveries to Belarusian refineries. In response, Belarus took transit oil from the Druzhba pipeline, which also supplies Germany, Poland, Slovakia, Ukraine, the Czech Republic, and Hungary. Moscow then fully suspended flows along the Druzhba pipeline for three days, causing small shortages in Europe.

In 2010, Russia cut gas supplies to Belarus by 15%, pressing its neighbour to pay a $192 million debt. In 2019, Russia halted all flows through the Druzhba pipeline for several weeks after Belarus and customers in Europe discovered chemical contamination in the oil. Russia has yet to compensate customers in Belarus, Germany, and Poland for the contaminated crude. In 2020, major Russian oil companies suspended supplies to Belarus, disrupting Belarusian oil exports to Germany. Russia agreed in 2021 to compensate Belarus for its losses on an ongoing basis. Belarus expects to receive $640 million from Russia in 2024 to compensate for losses sustained by its oil refineries.

Belarus wants to reduce its dependence on Russian energy

Russia and Belarus have had a tumultuous relationship regarding energy supplies, with several disputes over oil and gas in the past decade. Belarus depends heavily on Russian energy, and any interruptions in the flow of energy have had significant impacts on the country. Belarus has traditionally imported subsidised oil and gas from Russia, which played a crucial role in its economic growth in the early 21st century. However, energy subsidies have been declining since 2007, affecting Belarus's economy.

In 2019, Russia halted flows through the Druzhba pipeline after Belarus and European customers discovered chemical contamination in the oil. This crisis highlighted the vulnerability of Belarus's energy supply, as it resulted in small shortages. Russia has yet to compensate Belarus for the contaminated oil, with the issue linked to broader disputes between the two countries.

Belarus's economic dependence on Russia spans various sectors, including trade, energy, finance, and technology. Russian imports account for around 55-60% of all imports to Belarus, with energy products forming the largest part. Belarus imports over 80% of its energy resources from Russia, making it highly susceptible to shifts in Russian energy policy. The country's fiscal situation has become increasingly tied to Russia, with Russian financial assistance helping Belarus achieve a budget surplus in 2023.

To reduce its dependence on Russian energy, Belarus has taken steps to diversify its energy mix. With Russian support, the country has built a nuclear power plant, expected to meet 40% of its electricity needs. However, Belarus remains dependent on Russia for the fuel and technology required to operate the plant. Additionally, Russia has controlled Belarus's entire gas infrastructure through Gazprom since 2011, further solidifying its energy dependence.

The recent security crisis and economic isolation of Russia have increased Belarus's importance as Moscow's potential ally. Belarus's support for Russia's war in Ukraine has also contributed to its growing economic dependence, as it lost access to its second-largest export market and faced additional sanctions from Western countries. As a result, Moscow increased its energy subsidies and provided opportunities for Belarus to access new markets.

Frequently asked questions