BELARUS NEWS AND ANALYSIS

DATE:

10/01/2007

Belarus Leader Says Deal Struck on Russian Oil Flows (Update5)

By Lucian Kim

Jan. 10 (Bloomberg) -- Belarusian President Alexander Lukashenko said he and Russian President Vladimir Putin agreed to end a dispute that had closed Russia's main oil link to Europe, a claim the Kremlin wouldn't confirm.

Lukashenko and Putin agreed by phone today to break the deadlock and review proposals to resume the flow of oil through Russia's Druzhba, or Friendship, pipeline, Lukashenko said on his Web site. The Belarus leader later met Putin's key demand for starting talks -- canceling a tax on oil flows.

``The Russian side is satisfied with Belarus's decision,'' the Russian Economy Ministry said in statement on its Web site today. ``Talks will start tonight.''

Russia shut Druzhba, which had been moving 15 percent of its oil output, on Jan. 8 after accusing Belarus of illegal siphoning. The shutoff cut supplies to refineries across central Europe, forced countries including Germany and Poland to tap stockpiles, and renewed concern about Russia as a reliable energy supplier.

Slovakia's Economy Ministry said in a statement that supplies from Belarus would resume later today with an initial shipment of 80,000 metric tons. That's the same amount the Russian pipeline operator, OAO Transneft, had said Belarus stole.

No Confirmation

A Kremlin spokesman couldn't confirm a deal had been struck. The Kremlin later issued a statement saying only that Lukashenko initiated the call and that ``problems of the transit of Russian oil'' were discussed. Transneft hasn't received notification it can restart exports through Druzhba, Deputy Chief Executive Officer Sergei Grigoryev said by phone in Moscow.

``Moscow is waiting for Lukashenko's unconditional surrender,'' said Timothy Ash, an economist at Bear Stearns in London, in a note to investors.

Belarusian Prime Minister Sergei Sidorsky told reporters in Minsk a transit fee Belarus had imposed this month had been canceled. He said he would fly to Moscow tomorrow for talks with his Russian counterpart, Mikhail Fradkov, according to the Interfax news agency.

German Foreign Minister Frank-Walter Steinmeier phoned Russian Deputy Prime Minister Dmitry Medvedev today to demand a ``quick solution'' to the impasse. Germany, the biggest buyer of Russian gas, took over the rotating presidency of the European Union on Jan. 1. Medvedev, Putin's former chief of staff, is also chairman of OAO Gazprom, Russia's gas-export monopoly.

``The supply of Russian oil to Europe must be reinstated,'' Steinmeier said, according to a statement on Germany's EU presidency Web site. ``The oil dispute between Russia and Belarus must not be conducted at the expense of third parties.''

German Chancellor Angela Merkel said yesterday it was ``not acceptable'' that Russia hadn't consulted the EU about the shutoff. She is scheduled to visit Moscow on Jan. 21.

Gas Turned Off

Russia supplies a quarter of Europe's natural gas, mainly though Ukraine. Those flows were curtailed a year ago during a transit dispute similar to the current one with Belarus, leading to shortages in Germany, France and other EU countries.

The oil dispute with Belarus comes on the heels of another energy conflict between the two former Soviet partners. In the last minutes of 2006, Belarus succumbed to Gazprom's demands to pay twice as much for gas this year, barely averting a cutoff.

During the negotiations leading up to the gas agreement, Russia imposed a duty of $180 a ton on crude exports to Belarus, complaining that its former Soviet partner was buying crude at Russian domestic prices and reselling refined products on world markets.

Belarus retaliated by slapping a transit tax of $45 per ton on crude shipped through Druzhba. Transneft shut off deliveries earlier this week after saying Belarus had siphoned off oil as payment in kind for the transit tax.

Source:

http://www.bloomberg.com/apps/news?pid=20601085&sid=aWpeXmdQfHwI&refer=europe

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