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July 14, 2008
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Russian Oil Bypasses American Radar
// Deliveries to the Czech Republic down almost by half
Missile defense at the expense of oil
At the end of last week, Russia warned of one more action aimed at preventing an American missile defense system in Eastern Europe. Russian Foreign Minister Sergey Lavrov announced that the Iranian missile threat was implausible, and so there were no reasons to install antimissile radar in the Czech Republic and interceptor missiles in Poland. Simultaneously, and without explanation, Russia reduced its oil deliveries to the Czech Republic by almost half. The Czech Republic signed an agreement with the United States on the location of part of its missile defense system on its territory last week.
At the end of last week, the Russian Foreign Ministry responded to launches of Shahab 3 missiles during military exercises. The launches convinces Moscow that the missile defense system in Europe is premature, since the range of the Shahab 3 is no more than 2000 km., and that means the missile can reach Israel, but not Europe. We are convinced of the implausibility of conversations about the Iranian missile threat as a motivation for the establishment of a third site [in the U.S. missile defense shield]. Everyone who is interested in normalizing the situation in the region has to sit down and come to an agreement, Lavrov said.

On the sale day, the Czech Republic announced that Russia has nearly halved deliveries of oil to the country. Czech media warned that such a step in Russias response to the signing of the agreement last Tuesday on the location of radar for the U.S. missile defense system in the country.

Almost immediately after the signing of the agreement, the influential Czech economic weekly Euro stated that Great nervousness is being felt in political and business circles. In Prague, they were afraid of Russian retaliation. The Russian Foreign Ministry stated that Russia would respond to the location of the U.S. missile defense system neat its borders not with diplomatic, but with military-technical, methods, adding that Russia is forces to take adequate measures to compensate of the potential threat being created to its national security.

Czech Minister of Industry and Trade Martin Riman stated Friday in the late evening that, in his opinion, it would be too childish for Russia to react in such a way to the Czech-American agreement on the radar. Moreover, he said, the segment of the Czech population that opposed the radar would hardly react favorably to the reduction in oil deliveries. The minister stated that the government was investigating the situation, through the Russian embassy in Prague, and other channels, and hoped to receive a concrete answer from Moscow on Monday. But the fact remained that the reduction in oil deliveries through the Druzhba (Friendship) pipeline began on Tuesday, the day the Czech Republic signed the agreement on the U.S. radar.

There are two large oil refineries in the Czech Republic. The refinery in Kralupy has a capacity of 3 million tons per year, and the refinery in Litvinov has a capacity of 5 million tons. The refinery in Litvinov receives oil from the Druzhba pipeline, and Kralupys refinery is supplied with Mediterranean Sea oil. Ceska Refinerska AS owns both plants. It was not possible to receive timely comments from that company. But Unipetrol, which controls Ceska Refinerska and belongs to the Polish company PKN Orlen, confirmed the supply reduction Saturday on its website, adding that the shortage was being covered by oil from the Mediterranean that arrives through the TAL-IKL pipeline. Unipetrol general director Francois Vleugels told Reuters that the Russian side blamed technical causes for the delivery reduction. Czech authorities gave assurances that the reduction in Russian oil deliveries will not lead to a collapse of the Czech economy. First because the country has reserves to last 95 days, and second because it can increase deliveries through the Western Ingolstadt oil pipeline, which was built in the mid-1990s.

The southern branch of the Druzhba pipeline, with a capacity of 20 million tons, leads to the Czech Republic (and other countries in Eastern and Southern Europe). According to Info-TEK, the real volume of oil exported through the Druzhba pipeline to the Czech Republic monthly between January and May of this year fluctuated between within the range of 377,900 tons in March and 484,300 tons in May. Unconfirmed data in the Czech press holds that the country was to receive about 500,000 tons of oil in July, but received only about 300,000 tons.

Russian officials have yet to comment on the situation. No comments could be obtained from Transneft or the Ministry of Energy yesterday. Transneft was considering reducing deliveries through the southern branch of the Druzhba pipeline if Ukraine and Poland implemented a reverse transfer project and completed construction of the Odessa-Brody pipeline, which is now used only for backup. Since that project is only in initial stages, no decision has been made on it.

Russia made have claims against the Czech Republic in addition to the missile defense system. Those could range from the failure of LUKOILs attempt to obtain refining capabilities in the country to the Czech Republics support of the Nabucco project a natural gas pipeline that bypasses Russia and competes with South Steam for the same reserve base (Central Asia and Azerbaijan). On July 4, Czech Foreign Minister Karel Schwarzeberg urged European countries to participate in the project.

After problems arose with the delivery of Russian oil to the Czech Republic, the Polish pipeline operator PERN hastened to announce that that country was not experiencing any reduction in deliveries through the Druzhba line. Poland, unlike the Czech Republic, has not signed an agreement with the U.S. yet on the location of interceptor missiles on its territory. Last week, Polish Defense Minister Bogdan Klich said last week that the agreement could be signed if the U.S. installs Patriot missiles to modernize the Polish air defense system. Speculation continues that Lithuania is being considered as an alternative host of the interceptors. Gazeta Polska newspaper cited a U.S. Defense Department source as saying that missile defense elements could be installed in the area of Palanga or Salcininkai districts of Lithuania. Lithuanian President Valdas Adamkus stated last week that he is opposed to the location of missile defense elements in his country. I see no need for Lithuania to take on the responsibility, he said. Negotiations with Poland are not completed. Lithuania will not conduct negotiations with anyone until then.

If Lithuania suddenly decided to locate missile defense system objects on its territory, it would avoid the hardships that have now beset the Czech Republic. Oil deliveries to Lithuania through the Druzhba pipeline were turned off in July 2006, after the Lithuanian Mazeikiu oil refinery was sold to PKN Orlen. Vilnius has been insisting since then that the turning off of the pipeline was politically motivated. Russia stated in 2006 that Druzhba was turned off for technical reasons and repairs would take about a year. Deliveries to the Mazeikiu refinery have not been resumed.
Alexander Kuranov, Prague; Mikhail Zygar, Natalia Skorlygina

All the Article in Russian as of July 14, 2008

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