How the Belarus oil story has grown

I picked up some incoming traffic from Matthew Yglesias’ blog today. Wondering what was going on, I wondered over to his site, to find the following story about the Russian decision to shut down the flow of oil through Belarus:

All of Europe gets cut off from crude oil supplies, apparently.

His source is the New York Times, of all places, which has run a story with the headline:

Russian Crude Stops Flowing to Europe

Russian crude oil stopped flowing to Western Europe through a major pipeline across Belarus, officials here and in Europe said.

It isn’t until the fourth paragraph until the NY Times even mention the fact that only Germany, Poland and Ukraine are actually affected by the cutoff. And even then, it’s only in passing.

This isn’t really a criticism of Matthew – the NY Times story is incredibly misleading. But I found it fascinating to see how a little regional spat has turned into a public perception that big, bad Russia is turning off the lights all over Europe.

Update: Now Instapundit has picked up the meme.

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16 Responses

  1. It’s not correct that only Germany, Poland and Ukraine are affected. Also affected are Slovakia, Hungary and Czech Republic.

    The action has also resulted in a significant uptick in the worldwide price of oil, which has been on the downtrend recently (together with the Russian stock market). In fact, it’s possible to see the Belarus move as one aimed as much at jacking up the international oil price by fomenting instability (in the same way, Russia gives aid and comfort to Hamas and Hezbollah) as at damaging Belarus and giving Europe a convenient reminder of Russia’s power.

    Furthermore, it seems to me that unless you personally are subject to having your oil supply cut off by Russian action, you ought to be a bit more circumspect in condemning the outrage directed at Russia’s actions.

    I think it’s quite an accurate characterization of the situation to say that “big, bad Russia is turning off the lights all over Europe” and I think that if we fail to respond accordingly we are setting ourselves up for a massive headache later on.

  2. Andy says:

    Thanks for the update about how this is affecting Slovakia, Hungary and the Czech Republic. It appears from news reports as though oil to these three countries was shut off on Monday night, after the oil supply route to Germany and Poland was shut down.

    I don’t think that the argument that Russia is doing this to jack up oil prices really stands up to close scrutiny. For one thing, although prices may go up in the short term, the damage to Russia’s reputation (both generally, and as a reliable supplier of energy), will take a long term hit, the damage of which will heavily outweigh the short term benefits of a spike in oil prices.

    More likely, I think, is that Russia miscalculated how Belarus would react to being screwed over by Russia over gas, and events have spiralled somewhat outside of Russia’s control.

    I’m not condemning outrage directed at Russia, per se. Russia must take a share of the blame for this situation – as must Belarus – and deserves to take a beating in the press.

    What I am condemning or, rather, what I am disappointed about, is that a disproportionate amount of the blame is falling on Russia, and that the story has been exaggerated to make the impact of this week’s events seem greater than it actually is.

    The blame for this exaggeration lies partly with the media, and partly with Russia, for not realising just how much their previous actions have alienated their European neighbours and, indeed, made them fearful of Russia.

  3. Tim Newman says:

    More likely, I think, is that Russia miscalculated how Belarus would react to being screwed over by Russia over gas, and events have spiralled somewhat outside of Russia’s control.

    Yeah, that sounds about right, and the explanation is not without precedent. Russia’s history is littered with examples of a blundering leadership taking a course of action, miscalculating badly, and finding events spiralling out of control.

  4. Alex says:

    Even Matthew Yglesias managed to claim that “all Europe” had been “cut off from crude oil supplies”. I dropped a link to your post on it in his comments.

    On topic, clearly no-one anticipated that loyal little Belarus might fight back.

  5. I’m not saying increasing the prices is Russia’s only aim, but it’s clearly at least a side benefit and could easily be part of the equation. I don’t think damage to Russia’s reputation is part of the Russian consideration; if it were, would they have elected a proud KGB spy president? People will go on paying the market price for Russian oil no matter what Russia’s reputation is until they find alternative sources. Maybe Russia’s action will hasten the day when they do, but I think Russia is calculating that Europe won’t unify and take the trouble (or maybe it’s just totally misread the situation, as Tim says correctly is Russia’s wont).

    As for me, I think Russia isn’t getting nearly enough blame. Russia is the one that started this, by threatening the oil lifeline of a poor country without giving it adquate time to prepare. Belarus didn’t try to destabilize Ukraine in the same way, Russia did, and Belarus doesn’t threaten world security as Russia does. It’s simply a fact that Russia is trying to do with oil and gas in the 21st Century what the USSR tried to do with armies and nukes in the 20th, and we must respond the same way or face dire consequences. I think it’s very harmful to take our eye off the ball. It’s like saying a woman played some role in a rape. While you are parsing language and precisely assigning quantum of blame, a maniacal KGB spy is consolidating his dictatorship in Russia (and the peoples of Hungary, Slovakia and Czech Republic are starting to get very cold).

    I think some clarification is needed here, maybe Andy can undertake it: It’s only significant that France, Italy and Spain aren’t getting Russian oil following the Druzhba shut down if they WERE getting it before. I don’t know whether that’s the case or not. Is it? Maybe Russian oil stopped flowing to all the European countries that receive it, or maybe there are other pipelines that supply southern Europe. Can Andy or anyone let us know about this? I’d be particuarly intersted to know what volume, if any, of Russian oil France receives and from what source.

  6. Andy says:

    France receives approximately 11.4% of its oil supply from Russia. Even Germany, the only ‘Western’ European state affected by the oil cutoff, only receives 26.4% of its supplies from Russia (and, I think, not all of that comes via the Druzhba pipeline). Some European countries do receive a large proportion of their oil from Russia – particularly Hungary, which gets more than 80% of its oil from Russia, and is especially vulnerable. (Source: this BBC article, which has a handy table of how much of each European country’s oil comes from Russia).

    As far as I am aware, France and Spain continue to receive oil supplies from Russia, as per normal, as they receive their supplies through a pipeline that runs through Ukraine, and not Belarus.

    The only countries who are directly affected by the shut down of oil supplies via Belarus – that I’m aware of – are Germany, Poland, Ukraine, Slovakia, Hungary and the Czech Republic. However, all of these countries are (a) still receiving some oil by other routes and (b) have substantial stockpiles of oil to ensure that there is no short term dip in supply to consumers.

    I do agree with you that Russia deserves to take a lot of blame for the recent events in Belarus (although not all of the blame), and certainly deserves to be criticised for the general way in which it has approached energy policy over the past few years. Equally, I agree with you that Europe needs to take a good hard look at the way it approaches relations with Russia, and energy policy more generally.

    However, the debate within Europe is not helped by rather hysterical stories, such as the ones I noted in the article above, which imply that the impact of this week’s events was much greater than it actually was. They reduce, rather than increase the chance that Europe will settle on a sensible energy policy.

    If Europe under-reacts, it will end up with a bad energy policy. Equally, if Europe over-reacts, it will end up with a bad policy. Far, far better, to base policy on the actual facts, than on the hysterical mutterings of some sections of the press.

  7. Andy says:

    Oh – while I remember – here’s one more interesting statistic about oil in Russia:

    30% of the oil used in Europe comes from Russia.
    82% of Russia’s oil exports go to Europe.

    Read into that whatever you will about just who is dependent on who…

    Source: BBC News (again).

  8. Tim Newman says:

    Read into that whatever you will about just who is dependent on who…

    Russia clearly needs Europe’s custom more than Europe needs Russia’s oil. But, and I hate to sound condescening to Russians here, but they are so new to this capitalism lark that they have no clue as to how it works, and that they need both sides to play fair for it to work. Similarly with their handling of the Sakhalin II contract, they see themselves with the oil and gas and believe that they hold all the cards, as if they have a sword to somebody’s throat. I don’t think they have the first idea that the west holds a pretty strong hand too, one that played well – or at least better than the Russians – could bring Russia’s economy crashing down about their ears.

    Probably the most seriosu problem with this interpretation on international business is that it has immense support from the Russian population. They love the fact that Russia is screwing over western companies and making the west pay more by hiking up the price. Russians have long been known for their self-destructive collective ideas, and this is no exception: they cheered on their Soviet leaders as they led them down a path to grinding poverty, and they are doing the exact same now.

  9. Even if Germany only gets 10% of its oil through the Druzhba pipeline, that means if it is shut down 8 million people are living in freezing homes. I don’t think it’s at all “hysterical” to express urgent shock and outrage over this prospect, and it’s to say nothing of millions more people in Hungary, Czech Republic, Slovakia, Ukraine and Poland who are affected. How many people’s lives have to be on the line before we get upset? Andy, as you can see from the trackback, the rabid russophile Copydude has already seized upon your numbers to attempt to minimize the Kremlin’s blame in a pure propaganda move. While we are wringing our hands about whether we’ve got all the numbers exactly right before we act, the Kremlin is moving to achieve a chokehold on European energy just the way Hitler attempted to do with armies.

    I’m not sure there is any evidence at all that a modulated response has ever been effective with the Russians. Andy, if you have some evidence that it has been, please give it. I think that Russians are quite likely to perceive a modulated response as weakness and to go right on doing whatever it is we object to.

    I think Tim is quite right when he says: “Russians have long been known for their self-destructive collective ideas, and this is no exception: they cheered on their Soviet leaders as they led them down a path to grinding poverty, and they are doing the exact same now.” And I think that only very vigorous confrontation has any chance of jolting Russians out of this malaise before it utterly destroys them. The same can be said for Western governments, who are excrutiatingly slow to react to Russian outrages, to our great cost. Even now, despite all the “hysterical” rhetoric you complain about, we haven’t seen a single shred of action come out of Europe.

    So far from overreacting to Russia’s actions, I think the world is dramatically underreacting, and I congratulate the world’s media for invoking appropriately urgent rhetoric.

  10. UPDATE

    Even Germany, the only ‘Western’ European state affected by the oil cutoff, only receives 26.4% of its supplies from Russia (and, I think, not all of that comes via the Druzhba pipeline).

    According to the below graph from a German paper, both of the above statements are off:

    http://www.spiegel.de/international/0,1518,458871,00.html

    It states that Germany gets only 20% of its oil from Russia, not 26.4%, and it states that the Druzhba pipeline is the the ONLY significant source of Russian oil to Germany. There are pipelines through nations other than Belarus that deliver GAS to Germany, but not oil, and the vast majority of significant gas pipelines also run through Belarus.

    So, in fact, it appears that when the Druzhba line was shut down 100% of Germany’s oil from Russia was cut off, and this would potentially affect over 15 million German consumers in terms of availability once German reserves ran dry and could drastically alter the price for the entire country, impacting most heavily on the lower classes. I think this kind of jolting impact on the Germany economy, which heavily impacts Europe, is more than enough reason for not only Germany but all of Europe to be up in arms, to say nothing of the numerous other countries similarly affected.

    I’ve run a post on my blog with a chart showing overall European energy dependence on Russian gas (I’ve yet to see a similar one for oil but it will probably turn up).

    http://russophobe.blogspot.com/2007/01/european-dependence-on-russian-natural.html

    This chart clearly shows that only a few countries in Europe have avoided 50% or greater dependence on Russian natural gas, meaning that any Russian threats have extremely high signficance for virtually all European countries.

    Based on this, I think a perfectly credible argument can be made that it’s Andy, not the European papers, whose reaction was originally out of proportion to the threat involved.

  11. Andy says:

    Even if Germany only gets 10% of its oil through the Druzhba pipeline, that means if it is shut down 8 million people are living in freezing homes. […] How many people’s lives have to be on the line before we get upset?

    Kim – I think you are quite spectacularly missing the point here.

    8 million German people are not living in freezing homes. In fact, the shutoff has absolutely no impact on their day to day lives. Unless they read the papers, or watch the news, most people would not even notice the shutoff of oil to Germany.

    For one thing, Germany has substantial reserves of oil. Enough to last at least two months in the event that Germany’s entire oil supply is cut off. If 10% of Germany’s oil supply is cut off, the reserve will be sufficient for almost two years.

    Secondly, there are other supply routes for oil in the world that don’t involve Russia. They are more expensive, and would cause considerable inconvenience, but Germany can import oil from elsewhere if needed. This is why Germany has a reserve of oil – to buy it time to source oil or gas from elsewhere, should the need arise.

    Thirdly, if oil genuinely did start running out and Germany truly was faced with a national crisis, Germany has access to other forms of energy. Additionally, it would rationalise its current use of energy, redirecting it to ensure that essential users received energy, and did not freeze to death.

  12. Rebecca says:

    I actually think that the interruption in the supply of fossil fuels from Russia will prove a positive thing in the long term, especially if non Russian alternatives are more expensive, as it may provide a catalyst for Europe to make serious efforts in developing more environmentally sound ways of generating energy. As long as America continues to refuse to play ball on climate change, the less oil and gas Europe burns the better!

  13. Andy says:

    Absolutely – there is a growing belief among European states(spurred on, in part, by the interruptions in oil and gas supply via Belarus and Ukraine over the past couple of years) that they are overly dependent on imported energy.

    Europe (excluding, of course, Russia) imports more than 80% of its oil, and more than 50% of its gas from outside of Europe (not just from Russia, but from the Middle East, and other countries around the globe) and its dependence is expected to grow in the coming years. Given that the security of a large proportion of that supply can be considered to be unstable (not just the supply from Russia, but from countries such as Iran) it would be prudent for Europe to move as quickly as possible towards reducing that dependence.

    Europe isn’t a resource rich continent any more, so the most practical approach to reducing dependence on external energey sources is to invest in sources such as solar, wind, hydro and even nuclear power.

    Which will hopefully have some added side benefits for the environment…

  14. ANDY:

    You are the one missing the point. You think Germans should wait until they actually are freezing before doing anything drastic to protect themselves. Many would consider that a foolhardy piece of advice, and especially outrageous coming from somebody who isn’t subject to having his oil or gas cut off by Russia.

    The point is that 100% of Germany’s oil supply was cut off by Russia, and if it had continued that way Germany would have exhausted its reserves and been forced to find a gigantic new supply. You have offered no evidence whatseover that it could do so, and even if it could it would experience massive and debilitating price rises.

    Frankly, I think it’s amazing that you can urge people to “be calm” and have “dialogue” about their basic energy supply when it is threatened in a hostile manner by Russia. I think people are doing exactly the right thing in calling for immediate action to prevent a future occurrence of this nightmare scenario.

  15. Just to be clear: Nobody in the Western press reported that the lights and heat were going out in Europe immediately. What they reported was that Russia had turned off 100% of its oil supply to Europe without any warning as a means of achieving imperial domination of Belarus, and they warned that if continued at length such an action could be debilitating to Europe’s economy. Those reports were perfectly accurate and the call to action they sounded was most welcome.

  1. January 11, 2007

    […] Over at Siberian Light, Andy adds some needed perspective on the Russia-Belarus oil spat by adding some actual numbers. […]