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Russia Warns EU Of Oil Cuts Over Ukraine Row

Gazprom CEO Aleksei Miller
MOSCOW (Reuters) -- Russia has warned the European Union of oil supply cuts because of a fresh row between Moscow and Kyiv, the Slovak government said today, hours after Russia played down worries about a new gas row with Ukraine.

The Slovak Economy Ministry said Russia has warned the European Union that Slovakia, Hungary, and the Czech Republic could experience oil supply cuts. A European Union source said oil stocks in those countries were adequate to withstand cuts.

Europe, which receives the lion's share of its oil and gas needs from Russia, closely tracks Russian disputes with its neighbors after EU gas supplies were cut in the dead of winter in 2006 and 2009 due to disputes between Moscow and Kyiv.

Another key transit state, Belarus, cut Russian oil flows to Europe via the Druzhba pipeline in January 2007, also due to a pricing row, which further undermined the image of Russia, the world's top oil and gas producer, as a reliable energy supplier.

The earlier cuts occurred amid strained political relations between Moscow and its neighbors. Ukraine will hold a presidential election in January and analysts have said that if a relatively pro-Russian leader is elected, Moscow is likely to take a more accommodating stance in future energy negotiations.

Today, the head of Russian gas monopoly Gazprom, Aleksei Miller, said he expected Ukraine to pay its December gas bill in full and that he saw no repeat of gas rows -- backtracking from remarks made last week.

But he spoke only a few hours before the head of another Russian monopoly -- oil pipeline company Transneft -- accused Ukrainian politicians of setting new "unacceptable" terms for oil transit via the Black Sea port of Yuzhny.

Transneft President Nikolai Tokarev told Reuters Ukraine had asked Russia to pay more for transit and raised additional conditions concerning minimal volume guarantees, adding that oil supplies would be cut if no deal was quickly reached.

"We cannot and are not accepting tough terms. The [negotiation] process is continuing and I hope we will solve it before the New Year. But if they insist on their terms, we will also review the prospects of supplies," he said.

Asked about the cause of the dispute, Tokarev said: "These are purely political issues there [in Ukraine]."

The demand for higher fees from Ukraine comes as the International Monetary Fund has rejected Kyiv's request for a $2 billion loan to help the recession-strapped country meet financial obligations by year's end.

A senior official of Ukraine's central bank said last week it had enough foreign currency reserves to manage its finances until the end of the year.