Russian Druzhba Pipeline: Supply, Demand, and Control

Germany, Poland, and the Ukraine, as well as other countries in the European Union produce minimal amounts of petroleum within their borders, if any, and rely on imports for most all of their fueling needs. Thirty percent of all imported oil to the countries of the European Union begins its journey deep within Russia, half of it running through the Druzhba Pipeline that crosses through the small country of Belarus. “Druzhba” means “friendship”, but friendly feelings were not prevalent in January of 2007, when Russian oil monopoly Transneft halted pipeline service through Belarus, affecting many countries in Europe who were forced to use their limited on-hand supplies until the conflict was resolved.

The Druzhba Pipeline began pumping oil in the early 1960’s, when all of the territory it crossed was part of the Soviet Union. With the dissolution of the Soviet Union in the 1990’s, a new agreement was made between Russia and the newly formed republic of Belarus. This agreement allowed Russia to continue using the line as integral export transportation provided Belarus was able to receive its crude tariff free. Furthermore, Belarus was allowed to refine the crude, selling the resulting products to other markets, with the supposition that Belarus would share the profits with Russia. Belarus, in attempts to strengthen its growing economy, apparently chose to “forget” this profit sharing alliance, resulting in Russia raising the price of the oil it exported to Belarus in an effort to equalize Belarusian “forgetfulness”. The Russian shutdown of the pipeline in January 2007 was an immediate result of Russian suspicions that Belarus was illegally siphoning crude at several points along the line. The efforts of Belarus were undoubtedly motivated by the imposition of a new $180 a ton duty on oil sold to them by Russia beginning in January. To counteract this fee, Belarus demanded $45 a ton transit fee from Russia for use of the pipeline, and allegedly illegally siphoned oil because this transit fee was not being honored.

Trade agreements between countries are very fragile relationships, and the countries of Germany, Poland, and the Ukraine, were directly affected because of the disagreements between Russia and Belarus. These countries were forced to dip into their limited reserve supplies to make up for the interruption of service. Service in the United States is rarely interrupted, and never because of interstate squabbling, thankfully. Distributors like Triple Diamond Energy Corp and others make sure that the petroleum products American consumers need are always readily available.

About the Author: Robert Jent is the president of Triple Diamond Energy Corp. Triple Diamond Energy specializes in acquiring the highest quality prime oil and gas properties. For more information, visit www.triplediamondenergycorp.blogspot.com.