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Russia Vows to Supply Oil Despite Dispute

By Anna Shiryaevskaya and Stephen Bierman

(Bloomberg) — Russia pledged to maintain oil exports to three European countries as Prime Minister Vladimir Putin said Ukraine was abusing its position as a transit country almost a year after a dispute cut natural gas supplies.

"We have a contract and hope it will be implemented," Putin said today in Vladivostok, Russia.

Russia will continue oil exports even if no agreement on changes in oil transits accords is reached with Ukraine by Jan. 1, Deputy Prime Minister Igor Sechin said in Vladivostok.

Ukraine wants to increase the transit fees on the Druzhba and Odessa-Brody pipelines 15 percent to 20 percent and move to a "pump or pay" accord, Bohdan Sokolovskyi, an aide to Ukraine President Viktor Yushchenko, said yesterday. Russia notified the European Commission, and countries fed by Druzhba including Slovakia, Hungary and the Czech Republic of the talks under an early warning mechanism, the Energy Ministry said yesterday.

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

Transit States

"The problem is that transit states abuse their position in an attempt to reach exclusive terms for prices for their domestic consumption," Putin said.

The EU yesterday called on Russia and Ukraine, a major transit nation for oil and gas bound for Europe, "to ensure uninterrupted oil supply."

Sechin said Ukraine is also seeking to reduce the notification period for any volume reduction to 30 days. Russia is proposing 60 days, he said. "There won't be any problem with crude shipments," Sechin said.

"It is neither in Ukraine or Russia's interest to have a repeat of last January's energy dispute," Chris Weafer, chief strategist at UralSib Financial Corp. (USBN:RU), said in an e-mail today. Ukraine needs financing from the International Monetary Fund, while Russia is trying to improve its investment credentials, he said.

To contact the reporters on this story: Anna Shiryaevskaya in Vladivostok at; Stephen Bierman in Moscow

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