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Russian Oil Flows To Belarus Despite Talks Failure

A Hungarian engineer checks the pressure at a refinery plant of the receiving station of the Druzhba oil pipeline in Szazhalombatta.
MOSCOW (Reuters) -- Russian oil continues to flow to Belarus and via Belarus to the European Union despite a failure by Moscow and Minsk to clinch a new oil-supply deal at talks on January 9, a Russian Energy Ministry spokeswoman said today.

"Belarus is holding back the negotiation process. Russia has made unprecedented and very comfortable proposals about duty-free oil supplies.... But Belarus is demanding more," spokeswoman Irina Yesipova told Reuters.

She said she didn't know if talks would resume today or next week.

On January 9, Belarus' delegation left Moscow, and Minsk accused Russia of ignoring its arguments in a development that will revive fears of supply cuts to Europe, which have already pushed oil prices up.

Talks have repeatedly broken down over the New Year period, resulting in a brief interruption in supplies to Belarusian refineries.

Europe, mindful of a dispute in 2007 that cut around a million barrels per day of Russian oil supplies via Belarus, are keen the ex-Soviet states resolve their differences.

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 to a 15-month high above $83 a barrel during the past week.

Russia has repeatedly clashed with ex-Soviet states over energy pricing in recent years, prompting politicians from the European Union and the United States to accuse the Kremlin of using its energy might 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 around 20 million tons of oil last year at only 35.6 percent of the current crude export tariff. Russia has said Belarus can now buy only 6 million tons of Russian oil, for domestic needs only, duty-free.

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 reexported.

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.