Russia Warns EU of Winter Oil Cut-Off

In what has become an annual New Year's ritual, a dispute with Ukraine over energy transit fees could prompt Russia to cut oil supplies to Eastern Europe

By Krystof Chamonikolas and Daryna Krasnolutska

(Bloomberg)—Russia warned the European Union that it may cut off oil supplies to Slovakia, Hungary and the Czech Republic because of a dispute with Ukraine over transits, the Slovak government said.

Ukraine wants to increase the oil transit fees Russia pays by 15 percent to 20 percent next year and move to a "pump or pay" agreement, Bohdan Sokolovskyi, Ukrainian President Viktor Yushchenko's top aide for energy, said today by phone in Kiev.

At least 20 European countries suffered disruption of Russian natural-gas imports in January as the world's largest producer of the fuel cut supplies to Ukraine during a payment dispute that hurt the countries' reputations as supplier and transit nations. Russian oil exports to Europe were interrupted in January 2007 when Belarus sought to tax transits.

"Talks are still continuing and today's Russian statement is speculation," Sokolovskyi said. "We want to complete talks by year-end. The accord will be about transit via two pipelines: Odesa-Brody and Druzhba."

Russian Energy Minister Sergei Shmatko notified the European Union of the possible stoppage, the Slovak government said in a statement today, citing an official letter it received from the European Commission, the EU's executive body.

Irina Yesipova, an Energy Ministry spokeswoman, said she didn't know of the letter. Prime Minister Vladimir Putin's spokesman Dmitry Peskov said by phone today from Vladivostok that he wasn't "aware" of the letter.

"I can confirm that we have informed the member states of the situation," Mark English, an EC spokesman, said by phone.

The EU received notification from Russia "that such a risk is fairly high and that Europe should potentially prepare" for a supply outage, Slovak Prime Minister Robert Fico said today in Bratislava in comments broadcast by the TA3 television channel.

In the event of an oil supply halt, Slovakia's oil and oil- product reserves would last for more than 94 days, Fico said after an emergency meeting of Slovakia's Security Council to discuss the warning.

To contact the reporter on this story: Krystof Chamonikolas in Prague at kchamonikola@bloomberg.net

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