* Traders watch Russia-Belarus potash spat for oil market
clues
* Oil supply threats to Belarus slow to materialise
* Sechin leaves door open to potash giant nationalisation
By Dmitry Zhdannikov and Vladimir Soldatkin
MOSCOW, Sept 17 (Reuters) – Kremlinology, or understanding
Moscow politics, has long been crucial for traders of Russia’s
oil.
But rarely have the signals from the Russian capital been
trickier to read than in the ongoing diplomatic spat with
Belarus over another commodity, potash.
When Russia and its former Soviet neighbour first locked
horns in August over the collapse of a joint Russian-Belarusian
potash production cartel, the prognosis for Russian crude
supplies looked straightforward.
Russia had been expected to retaliate by cutting oil
supplies to Belarus, a traditional move in rows between Moscow
and Minsk that would also hit refineries in Poland and Germany
by emptying Belarusian transit pipelines.
Russia’s pipeline monopoly, run by Nikolai Tokarev, a close
ally of President Vladimir Putin, did not surprise by ordering a
swift curtailment in flows.
But then Putin’s top ally in the oil industry, state giant
Rosneft’s head Igor Sechin, said he would oppose the
cuts, effectively siding with Belarus and its long-time leader
Alexander Lukashenko.
What started as a fairly predictable game is quickly
becoming one of the more complex stories of feuding clans in
Putin’s entourage.
“My head is spinning. This Belarusian story is one of the
most important for Europe’s oil markets this winter. Everyone
wants to know where this oil ends up and how much prices will
drop,” said a big buyer of Russian oil with a Western major.
PUTIN SILENCE
Sechin, who has built Rosneft into the world’s largest
publicly traded oil firm by output since Putin became Russian
leader in 2000, says he opposes the cuts as Belarus is one of
the most profitable destinations for Russian oil.
“Who will compensate us for the losses?” he said on a visit
last week to Minsk, where he met Lukashenko, whose ties with the
Kremlin, based on loyalty in exchange for economic and financial
support, have often been difficult.
“We want to continue supplies … We don’t have any
problems,” said Sechin. Belarus has two major refineries, one of
which is partially owned by Rosneft.
While most traders agree that duty-free oil exports to
Belarus are indeed a significant money-spinner, they note that
profitability was hardly ever a factor in previous spats between
Russia and its much poorer neighbour.
Russia has cut energy supplies to transit countries Ukraine
and Belarus several times over the past decade during various
disputes, in what the European Union has repeatedly described as
politically motivated moves that put EU energy security at risk.
Yet Putin has said surprisingly little since Minsk detained
Vladimir Baumgertner, CEO of Russian potash producer Uralkali
, in August. Belarus accuses the executive of causing
damage by sparking a possible collapse in global potash prices
as a result of quitting a partnership with a Belarusian firm.
“The most important thing is that Putin, who decides on
everything, so far hasn’t lashed out with criticism of Belarus,”
said Ildar Davletshin, an energy analyst at investment bank
Renaissance Capital in Moscow.
Such a move by Minsk would have been impossible without the
blessing of Lukashenko and would normally be expected to
precipitate a tough response from the Kremlin.
The absence of such a reaction has triggered market
speculation about Sechin’s intentions and whether he and Putin
want the same thing.
NATIONALISATION
Key among the questions traders are asking is whether
Uralkali’s billionaire owner Suleiman Kerimov has fallen out of
favour with Putin as a result of quitting the potash cartel and
infuriating close ally Belarus.
Kerimov has seen abundant support from officials in the
government of Prime Minister Dmitry Medvedev.
On Tuesday, a preliminary export schedule by the Russian
energy ministry showed oil supplies to Belarus would be cut by
over 40 percent from October to December.
That in theory could lead to a massive drop in Russian oil
prices in the Baltic region, as most volumes would be rerouted
to that market. It might also trigger a supply crisis at Polish
and German refineries as Belarus could cut transit supplies, as
it has done in the past.
But given Sechin’s opposition to the cuts for Belarus and
near-normal supplies in September, oil traders say they have yet
to get a clear picture about the outlook for supplies from
Russia in coming months.
“I’m learning something new about potash every day,” a
Russian trader with a major company joked.
Sechin seems to be learning about potash too.
On Monday, he said the owners of Uralkali had yet to make an
offer to sell their shares to Rosneftegaz, a state holding
company Sechin heads in addition to his job at Rosneft. That
remark left the door open to a potential nationalisation – even
if Sechin ruled out a purchase by Rosneft.
Such a scenario would reduce the likelihood of an energy
spat with Belarus, said Sergei Zhavoronkov of the Gaidar
Institute, a Moscow-based think tank.
“Longer-term, those conflicts will continue … We are
seeing those spats with Belarus almost every year,” he said.
