Russian President Vladimir Putin said Tuesday that the world's second biggest oil exporter may cut output, resolving to make Belarus back down in a trade dispute that has shut off a major oil pipeline to Europe.
Russia and Belarus have been at loggerheads over the transit of Russian crude oil through Belarus to Western Europe. Transit shipments along the Druzhba pipeline were halted over the weekend, disrupting Poland, Germany and Hungary.
Industry and Energy Minister Viktor Khristenko, quoted by the Interfax news agency, confirmed on Tuesday that Russian pipeline operator Transneft, which has accused Belarus of siphoning off Russian oil intended for western Europe, stopped pumping oil to the pipeline Monday morning.
Putin instructed the government "to discuss with Russian companies the possibility of reducing oil production in connection with the problems emerging in the transportation of oil via Belarus," the Itar-Tass news agency reported.
Russia provides about a quarter of the European Union's oil and gas, some of which is piped through Belarus, principally to Poland, Germany and Lithuania. Fears were quelled somewhat when EU Energy Commissioner Andris Piebalgs said on Monday the disruption of Russian oil flow posed "no immediate risk" to energy supplies in the bloc.
"Everything necessary should be done to secure the interests of Western consumers" of Russian oil, Putin was quoted as saying at a cabinet meeting.
He asked government officials to continue talks with Belarus to resolve the dispute.
A Belarussian government delegation led by Deputy Prime Minister Andrei Kobyakov arrived in Moscow earlier on Tuesday for talks with Russian officials.
Economic Development and Trade Minister German Gref spoke after a meeting with Kobyakov that Russia would only enter negotiations with Belarus after Minsk abandons a new customs duty on Russian oil piped through Belarus,. This new duty came in retaliation after Moscow imposed export duties on crude oil supplied to Belarus at the start of 2007.
Meanwhile, the government, Transneft and the state railways company are jointly searching for new routes for Russian oil exports to Europe that bypass Belarus, Gref was quoted by Interfax as saying.
Analysts said both countries would need a rapid compromise or risk taking an unavoidable economic hit. However, crude oil futures depressed by an unusually warm US winter fell by US$1.91 a barrel to US$54.18.
"Russia's export pipeline structure cannot offer alternative routes for the volumes supplied to Europe via Druzhba, and thus a mutually acceptable agreement will have to be reached," said Steven Dashevsky, oil analyst at Aton brokerage in Moscow.
The row over oil followed a dispute over natural gas supplies between the two countries. After tense negotiations that dragged on until New Year's Eve, Belarus agreed to double its previous price for Russian gas supplies this year.
Under a deal with Russian gas giant Gazprom, Belarus would buy Russian gas at US$100 per 1,000 cubic meters in 2007. The country bought gas from Gazprom at US$46.7 per 1,000 cubic meters last year.
(Xinhua News Agency, China Daily via agencies January 10, 2007)
