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Russia's Oil Shutoff to Belarus Threatens European Supplies

The Druzhba oil pipeline system

The Druzhba oil pipeline system

A dispute between Russia and Belarus over the price of oil threatens to disrupt supplies to Europe after reports said Moscow has begun cutting supplies to its former Soviet neighbor.

Reuters quoted oil traders on January 3 as saying Russia had begun cutting crude oil supplies to two refineries in Belarus after the two sides failed to renew an oil export agreement that expired on December 31.

But local news agencies quoted Russia's pipeline monopoly Transneft and the Belarus state oil company today as saying supplies haven't been affected.

European countries are closely following negotiations between Moscow and Minsk because they depend on Russian oil shipped through the Soviet-era Druzhba pipeline. Supplies to refineries in Germany and Poland were disrupted during a similar dispute in 2007.

Russia at the time accused Belarus of siphoning supplies. This time, Moscow says deliveries to Europe won't be affected.

Russia pumps more than a million barrels a day through the Druzhba pipeline. Germany gets 15 percent of its oil through the pipeline. Poland depends on it for more than 75 percent of its needs.

Last year, Moscow charged Minsk only one-third of its standard export duties for oil, something the Kremlin says is a holdover from Soviet-era subsidies.

Belarus refines most of the crude oil it gets from Russia for reexport to European countries, which are charged full price. The billion-dollar profits have helped prop up the authoritarian regime of Belarusian President Alyaksandr Lukashenka.

The Kremlin now says it wants to switch to market-based prices after years of subsidizing Belarus. But Minsk says it should pay no taxes because it's part of a customs union with Russia and Kazakhstan.

Belarus has threatened to raise by 10 times the oil-transit fees it charges Russia in response to Moscow's terms.

Political Energy Disputes

Belarus says Russia is exerting "unacceptable" pressure, feeding accusations the Kremlin uses its vast energy supplies as a political tool to intimidate its neighbors.

In 2006, Russia demanded a fourfold natural-gas price increase from Ukraine's new pro-Western government, only months after signing a five-year contract. Moscow's ensuing gas shutoff disrupted supplies to Europe.

In a repeat last year, millions were left without heat for weeks during freezing temperatures.

Despite the tensions, Russia remains Belarus's closest ally. The two sides have been in talks for years over plans to create a political union, but energy disputes and a warming in ties between Minsk and European countries have stalled the project.

Russian officials say talks between the two sides are ongoing, but that negotiations have failed to produce results so far. Reports say the two affected refineries in Belarus have enough reserves to continue operations for a week.

News of the cutoff helped nudge global oil prices to more than $80 a barrel.

compiled from agency reports