Kremlin 'reserved' after Minsk announces oil solution

Jan 10, 2007, 13:34 GMT

Moscow - Russian officials warned Wednesday against premature celebrations of an end to a three-day oil crisis that has halted Russia's vast supplies of the fuel to Europe.

The Kremlin's press service noted that while Russian President Vladimir Putin had spoken to Belarusian counterpart Alexander Lukashenko by telephone, Moscow, unlike Minsk, was not yet ready to speak of a compromise.

The Kremlin's official line 'looks more reserved' than assertions by the Belarusian presidential administration that the two leaders had struck a deal ending the tariffs standoff, Russian television channel NTV quoted the Kremlin's press service as saying.

'Questions of economic cooperation were discussed, including in the energy sphere and including problems with the transit of Russian gas through Belarus,' the Kremlin said.

The statement added the phone call had been Minsk's initiative.

Lukashenko representatives, meanwhile, have said he and Putin reached a compromise settling the tariffs tiff, which has seen first Belarus and then Russia cut flows on the Druzhba pipeline, which ships 80 million tons of Russian oil into Europe each year.

Belarus said the leaders reached an agreement after a 'lengthy' telephone conversation and that they were assigning their prime ministers the task of working out details by Friday.

No specifics about what such a compromise might entail were released.

The difficulties with Belarus developed last month, when Russia introduced a tariff of approximately 180 dollars per ton of oil delivered into Belarus. Previously, Belarus had not paid any tariff, and profits from exports to Europe were split 85-15 between the two.

The new tariff was coupled with an increased price for Russian natural gas that, at 100 dollars per 1,000 cubic metres, is twice what Minsk paid in 2006 though less than any other country pays.

Belarus in return tacked on a 45 dollar-per-ton transit tariff for Russian oil exports, which analysts estimate would cost producers 6 dollars per barrel.

When Russia balked at the tariff, Belarus cut the flow to Europe. Moscow then stopped Druzhba - Russian for 'friendship - altogether.

Poland, Germany, Hungary, Slovakia, the Czech Republic and Ukraine have all either been cut off entirely from the flow or seen reduced delivery volumes as a result of the dispute.

While European reserves have protected consumers against serious oil shortages, the disagreement has caused the EU to once again question Russia's reliability as an energy partner.

Russia cut off natural gas supplies to the Ukraine amid a pricing dispute just over a year ago, and many in the EU worry the source of a third of their gas and a quarter of their oil needs may hold those supplies hostage in order to settle political disputes.