Russia Resumes Pumping Oil to Europe

Posted 11 January 2007 @ 02:38 pm EET     Print     Reprint     E-Mail     Comments

MOSCOW (AP) - Oil resumed flowing through the main pipeline from Russia to Europe after Moscow and neighbouring Belarus resolved in principle a transit row that has disrupted exports and prompted fears over energy security in the European Union.

Russia restarted pumping through the Druzhba (friendship) pipeline across Belarussian territory early on Thursday, said the deputy chief executive of Russian oil pipeline monopoly Transneft, Sergei Grigoryev, quoted by RIA Novosti.

Supplies to several EU countries were halted Monday when Russia refused to pay a new transit tax imposed by Belarus, prompting sharp criticism of the way Moscow was handling the crisis by German Chancellor Angela Merkel, the EU's current president and also chair of the G8 (Group of Eight) leading economies. Russia had insisted that before resuming supplies, Belarus should first pump to European customers some 80,000 tonnes of crude oil it had taken from Russia and stored in lieu of transit fee payments.

Belarussian Prime Minister Sergei Sidorsky was due in Moscow later to finalise the resolution agreed in a telephone conversation Wednesday by Russian President Vladimir Putin and his Belarussian counterpart Alexander Lukashenko. Sidorsky's spokesman Alexander Timoshenko said Minsk had agreed Moscow's main demand for ending the crisis: that Belarus cancel the 45-dollar-per-tonne tax on oil transit through Druzhba, which is the main export pipeline to Europe.

The Druzhba pipeline accounts for around a third of Russian oil exports and some 12.5 percent of total EU oil consumption. Sidorsky said that he "and Russian counterpart Mikhail Fradkov must prepare all issues over the next two days, so that Russia and Belarus can resume trade relations without any exceptions and customs limitations."

Under the deal to be finalised, Belarus and Russia might agree a new framework for the oil trade underlying the dispute, in which Belarus receives oil from Russia, refines it and sells it on to European consumers, the Vedomosti business daily said Thursday.

Belarus had benefited from getting the oil cheaply from Russia as part of an economic union between the two countries, until Moscow imposed a tax on the exports to Belarus on January 1, prompting the retaliatory tax by Belarus. To end the standoff the two countries may revert to an older arrangement that existed in the 1990s by which Belarus paid Russia part of the duties it received from exporting oil products to Europe, said Vedomosti, citing unnamed officials.

The resolution to the dispute averted a cut in oil output by Russia, the world's second largest oil exporter after Saudi Arabia, which Putin had warned might be necessary. But Russian newspapers said that Moscow might still go ahead with imposing new tariffs on a range of Belarussian products, undermining a longstanding plan by the two countries to form a joint state.

In the light of the cut-off, Russia will be looking at ways of diversifying routes for exporting oil so as to reduce dependence on Belarus, the Gazeta newspaper quoted Deputy Economic Development Minister Andrei Sharonov as saying.
"Russia will diversify the flow of oil supplies the situation with Belarus showed the vulnerability of Russian contracts," Sharonov said.