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Russia, Belarus To Renew Oil Talks

Workers at a station on the Druzhba pipeline in Belarus

Workers at a station on the Druzhba pipeline in Belarus

MINSK/MOSCOW (Reuters) - Belarus and Russia will renew attempts on January 9 to settle a dispute over oil pricing that has raised concerns of potential supply cuts to Europe and helped push crude prices to a 15-month high this week.

Belarus will send First Deputy Prime Minister Vladimir Semashko, who has authority to sign a deal, to revive talks that have repeatedly broken down over the New Year period, resulting in a brief interruption in supplies to Belarusian refineries.

"The heading to Moscow to continue talks on the terms for Russian oil supply to Belarus," the Belarusian government said in a statement.

"The position of the Belarusian side, as before, is based on the need to reach a mutually acceptable agreement within the framework of existing Belarusian-Russian relations," it said.

Europe, mindful of a dispute in 2007 that cut Russian oil supplies via Belarus, is keen that the ex-Soviet states resolve their differences. The Belarusian spur of the Druzhba pipeline supplies about one-tenth of Europe's supplies from West Siberia.

The latest dispute, which centers on the tariffs Belarus must pay for Russian oil, has yet to affect supplies to Europe, but it was a contributing factor to oil's push this week to a 15-month high above $83 a barrel.

The Belarusian government, which stands to pay $2.5 billion should Russia get its way, said its delegation had been invited to Moscow by Igor Sechin, the powerful deputy of Prime Minister Vladimir Putin who holds sway over Russia's oil and gas sector.

The visit, which will be the third time a Belarusian delegation has travelled to Moscow since talks broke down on New Year's Eve, was also confirmed by Russia's Energy Ministry.

"The Belarusian delegation is flying back to Moscow tomorrow to resume negotiations. We hope the agreement will be concluded in the near future," the ministry's spokeswoman, Irina Yesipova, said by telephone today.

President Alexander Lukashenka, who has run Belarus since 1994 along Soviet-style command lines, made no reference to the oil dispute during his first public speech of 2010 today at a religious festival in Minsk.

Russia has repeatedly clashed with ex-Soviet states over energy pricing in recent years, leading politicians from the European Union and the United States to accuse the Kremlin of using its vast resources to bring its neighbors to heel.

Russia says it wants simply to bring energy prices and transit fees into line with the market after subsidizing its neighbors for many years with preferential terms. Much of its oil and gas must cross Ukraine and Belarus to reach Europe.

Russia allowed Belarus to import oil last year at only 35.6 percent of the current crude export tariff. Putin has said Belarus can buy 6 million tons of Russian oil, for domestic needs only, duty-free.

But while Minsk argues all Russian oil should be duty-free, Moscow now wants payment in full for about 14.5 million tons a year of crude that is mostly refined and re-exported.

The additional payments could potentially cost Belarus at least $2.5 billion, or 5 percent of its gross domestic product.

Russia halted supplies to the two refineries in Belarus, Naftan and Mozyr, after the countries failed to clinch a deal by New Year. Flows restarted on January 3.

Germany and Poland would be worst affected should the dispute affect transit supplies to Europe. Germany last year received 350,000 barrels per day (bpd) of crude via the Druzhba pipeline, or just under 15 percent of its total consumption.

Refineries belonging to Total, Shell, and BP are among the biggest buyers of crude from Druzhba.

Poland imports around 400,000 bpd of crude via Druzhba for domestic refining, more than three-quarters of its consumption, and exported another 90,000 bpd of Druzhba crude via the Baltic Sea port of Gdansk.