Venezuela inks oil deal with Belarus

MINSK Sat Oct 16, 2010 3:16pm EDT

1 of 2. Belarus' President Alexander Lukashenko (R) shakes hands with his Venezuelan counterpart Hugo Chavez in Minsk October 16, 2010. Chavez arrived in Belarus for a two-day working visit.

Credit: Reuters/Vasily Fedosenko

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MINSK (Reuters) - Venezuelan President Hugo Chavez agreed on Saturday to supply the former Soviet republic of Belarus with 30 million tonnes of oil over three years from 2011 in a deal worth as much as $19.4 billion.

Belarus has slashed imports of Russian Urals blend oil and increased purchases from Venezuela since Moscow imposed export duties, a step that raised the price of Russian exports to Belarus by about 36 percent.

"Belarussian refineries will have no shortages for the next 200 years," Chavez said after over seven hours of talks with his Belarussian counterpart, Alexander Lukashenko, in Minsk.

"We are proud of the fact that our vessels can supply our oil to Belarus," Chavez added after officials from the Venezuelan state oil company PDVSA and the Belarussian Oil Company signed the accord.

Neither side disclosed the price tag for the deal. But state statistics show Belarus is currently buying Venezuelan crude for $647 per metric tone, pricing 30 million tonnes at about $19.4 billion, according to Reuters calculations.

That is a major boon for Belarus, whose gross domestic product is just $55 billion.

"I thank you not only for the oil but for the colossal help which you have given to the Belarussian people," Lukashenko told Chavez. "At this difficult time, you have given Belarus your shoulder to lean on."

Lukashenko visited Venezuela in March in an effort to secure energy supplies after Russia, the country's main supplier, drastically cut the flow of cheap crude to its ex-Soviet neighbor. Lukashenko has repeatedly attacked Moscow for cutting the energy subsidies.

Relations between the two former allies deteriorated further after Minsk gave refuge to a former Kyrgyz leader criticized by Moscow and threatened to cut Russian oil and gas transit to Europe in a gas pricing dispute in June.

Still, Belarussian statistics show that Russian Urals blend itself is cheaper -- at $419 per metric tone at the end of August -- than Venezuela's Santa Barbara crude.

Russia agreed on Friday to help build Venezuela's first nuclear power plant, sell it tanks and buy $1.6 billion of oil assets, reinforcing ties with Chavez, who shares Moscow's opposition to U.S. global dominance.

Belarus's Mozyr refinery currently receives Venezuelan imports by rail from ports on the Baltic and Black seas.

But Belarus has plans to reverse a part of the Europe-bound Druzhba pipeline to allow greater volumes of Venezuelan crude to reach Belarus from Odessa.

Belarus refines the crude from Russia and Venezuela and then sells the products on to European Union customers.

(Reporting by Andrei Makhovsky, writing by Guy Faulconbridge; editing by Mark Heinrich)

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