Bloomberg News

Russian Minister Meets Oil Chiefs to Discuss Belarus Blockade

January 10, 2007

Russia's energy minister met with oil executives to discuss the effect of shutting down Russia's main export pipeline to Europe, which remained closed for a third day in a dispute with Belarus over oil duties.

The minister, Viktor Khristenko, met executives last night and today, Yevgeny Trufanov, a ministry spokesman, said in a phone interview today. President Vladimir Putin yesterday told ministers, including Khristenko, to discuss with executives the possibility of reducing crude production.

``They discussed the risks associated with the transit oil,'' Trufanov said. He declined to elaborate.

Russia shut down its Druzhba pipeline through Belarus on Jan. 8, after imposing an export tax on oil going to Belarus. Belarus in turn said it would charge a transit fee to ship Russian crude west. About 1.4 million barrels a day flows through the pipeline to Europe, about 15 percent of Russia's oil output.

Concern is rising in Europe about Russia's reliability as an energy supplier, especially since it cut off natural-gas supplies a year ago in a dispute with Ukraine. The Druzhba pipeline splits into a northern line running through Poland and into Germany and a southern line through Ukraine to Slovakia, the Czech Republic and Hungary. Oil deliveries to all of them were have been disrupted.

A Third Day

OAO Transneft, Russia's state-run pipeline operator, is not sending oil through Belarus for a third day, Sergei Grigoryev, the company's deputy chief executive, said by phone earlier today. ``Nothing has changed,'' Grigoryev said. ``We're dealing with the problem through all available means.''

He said Transneft was redirecting Druzhba oil to storage tanks, refineries and other export hubs, such as the Primorsk port on the Baltic Sea.

Talks between Russia and Belarus lasted until midnight yesterday, said Russian Economy Ministry spokeswoman Alla Borisenkova. Belarusian Deputy Prime Minister Andrei Kobyakov, the nation's chief negotiator, is still in Moscow, Alexander Timoshenko, a government spokesman, said by phone from Minsk.

Last month, Russia imposed a duty of $180 a ton (about $24.50 a barrel) on crude exports to Belarus, complaining that its former Soviet partner was buying crude at Russian domestic prices, refining it and selling the products on world markets. Belarus retaliated by slapping a transit tax on Transneft of $45 per ton of crude shipped through Druzhba.

Transneft shut off deliveries after saying Belarus had siphoned off oil as payment in kind for the transit tax.

To contact the reporter on this story: Lucian Kim in Moscow at lkim3@bloomberg.net

To contact the editor responsible for this story: Daniel Tilles at dtilles@bloomberg.net


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