BELARUS NEWS AND ANALYSIS

DATE:

09/01/2007

Belarus-Russia Dispute Cuts Flow of Oil Further West

By Marek Miler

Jan. 9 (Bloomberg) -- The flow of Russian oil to Slovakia, the Czech Republic and Hungary stopped late yesterday, expanding a disruption triggered by a dispute between Russia and Belarus.

Shipments to Poland and Germany had halted earlier yesterday. Government and refinery officials in all the countries affected said they could use stockpiled oil to avoid shortages of fuel.

``The suspension of the supplies will not affect supplies of motor fuels and prices in coming days, because the refiners will use reserves,'' said Petr Novak, an analyst at Atlantik Financial Markets, a brokerage in Prague. ``The conflict will be resolved within a week, as there is a huge pressure on Belarus to settle the dispute.''

The cutoff came after Belarus started charging a transit tax on oil shipped across its territory through the Druzhba pipeline, in retaliation for Russia's imposing an export tax on crude sent to Belarus. The shutdown is the third in as many years caused by disputes between Moscow and the nations that transport its crude and natural gas.

Druzhba is the world's largest pipeline. Built by the Soviet Union in the 1960s to transport oil to the former Communist bloc, it begins in Samara, in southeastern Russia, and runs through southern Belarus, where it splits into a northern and southern branch. The northern branch takes oil into Poland and from there to Germany. The southern branch runs through Ukraine to Slovakia, the Czech Republic, and Hungary.

Deliveries Halted

Oil flowing via Druzhba to Ukraine has stopped, Oleksandr Dikusarov, an adviser at VAT UkrTransNafta, said today by phone from Kiev. UkrTransNafta is the state-run oil pipeline operator. Russian oil is also pumped to Ukraine through other pipelines, Dikusarov said, and UkrTransNafta is ready to pump oil to Hungary and Slovakia along other routes.

Oil deliveries from Ukraine to Slovakia stopped yesterday at 8:15 p.m. local time, the Czech Industry Ministry said in an e- mail. Supplies to Mol Nyrt., Hungary's biggest refiner, halted as well, Mol spokesman Gyorgy Bacsur said in a phone interview.

Slovnaft, a Slovak refinery controlled by Mol, is still producing fuel, using its own reserves, Kristina Felova, a company spokeswoman, said in a phone interview today. If it needs to, the company could also use state reserves of crude, she said.

``The stoppage should not last too long,'' Felova said. ``We are in close contact with the Economy Ministry and the Administration of State reserves.''

Mol shares rose 1 percent to 20,200 forint by 10:32 local time, rebounding from a two-month low. Shares of Unipetrol AS, the Czech Republic's largest refiner, rose 0.4 percent to 232.50 koruna.

Czech Oil

The Czech Republic is getting oil from storage tanks in Slovakia, the Czech ministry said. The tanks hold at least 52,000 metric tons of oil and can meet the country's demand for four days. Industry Minister Martin Riman said on Czech television last night the country has reserves of about 100 days and a disruption of fuel production is unlikely.

Riman scheduled an extraordinary press conference for 3 p.m. in Prague to comment on the latest development.

``Our citizens do not have to be worried because the Czech Republic is well-prepared for such a situation and can deal with it,'' Riman said in the press release.

Source:

http://www.bloomberg.com/apps/news?pid=20601087&sid=a_gAJD0rUFdo&refer=home

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