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Russia reopens biggest oil link to Europe after three-day halt - extended

Russia, the world's second-biggest oil exporter, reopened its largest pipeline to Europe today, edging closer to resolving a dispute with neighboring Belarus that cut flows to refineries across central Europe.

„The entire Druzhba pipeline system is working at full volume,” Sergei Grigoryev, deputy CE of Russian pipeline operator OAO Transneft, said by telephone today. „We started pumping the oil at 8:22 a.m.” The Druzhba pipeline, which has a capacity of 2 million barrels per day, started sending oil to Europe from the Belarus pumping station in Gomel late yesterday. The oil sent initially was the 79,000 tons of Russian crude Belarus „taken from us” on January 7, Grigoryev said. Russia shut Druzhba, which had been moving 15% of its oil output, or 1.4 million barrels of oil per day, on January 8 after accusing Belarus of illegal siphoning. The shutoff cut supplies to refineries in Poland, Germany, Slovakia, the Czech Republic and Hungary, and renewed concern about Russia as a reliable energy supplier.

Russia and Belarus were scheduled to resume talks in Moscow following a telephone conversation between officials earlier yesterday, the Russian Economy Ministry said in a statement on its Web site. An agreement could be reached quickly, Vladimir Chizhov, Russia's ambassador to the European Union said at a press conference in Brussels yesterday. The Belarusian government posted on its official Web site a resolution canceling a transit tax on Russia oil, imposed in retaliation for higher charges imposed by Moscow for crude supplied to the former Soviet state. „The Russian side is satisfied with Belarus's decision,” the Russian Economy Ministry said in statement on its Web site yesterday. Semyon Vainshtock, chairman of OAO Transneft, Russia's oil pipeline operator, said Belarus has officially informed the company that the charge was canceled, Interfax reported. Vainshtock spoke at a press conference in Moscow, the news agency said. It may take up to two days to restart oil shipments, Belarusian Prime Minister Sergei Sidorsky said in a statement on his government's official Web site yesterday.

Belarus' Sidorsky will meet in Moscow today for talks with his Russian counterpart, Mikhail Fradkov, Belarusian government said in the statement on its Web site. „We hope that during the next two days other issues in the bilateral trade between Belarus and Russia will be solved, including oil shipments for Belarus domestic needs and its transit via Belarusian territory, Sidorsky said, quoted in a statement on Belarusian government's official Web site. Russian officials also accused Belarus of illegally siphoning oil from the Druzhba pipeline, which carries at least a third of all Russian oil exports to Europe. „The oil they claim we illegally siphoned in fact was paid for,” said Oleg Morozov, a spokesman at the Belarusian embassy in Washington D.C., in a telephone interview. The shutoff by Russia cut crude supplies to refineries across central Europe, forced countries including Germany and Poland to tap stockpiles, and renewed concern whether Russia is a reliable energy supplier.

German Foreign Minister Frank-Walter Steinmeier phoned Russian Deputy Prime Minister Dmitry Medvedev earlier today to demand a „quick solution” to the impasse. Germany, the biggest buyer of Russian gas, took over the rotating presidency of the European Union on January 1. Medvedev, Putin's former chief of staff, is also chairman of OAO Gazprom, Russia's gas-export monopoly. „The supply of Russian oil to Europe must be reinstated,” Steinmeier said, according to a statement on Germany's EU presidency Web site. „The oil dispute between Russia and Belarus must not be conducted at the expense of third parties.” German Chancellor Angela Merkel said yesterday it was „not acceptable” that Russia hadn't consulted the EU about the shutoff. She is scheduled to visit Moscow on January 21. Yesterday's announcement to end the dispute between the governments of Russia and Belarus „shouldn't make us feel too relaxed,” said Fatih Birol, chief economist of the International Energy Agency, at a US Senate hearing in Washington. „The market may need more oil in the months to come,” Birol said. The markets current balance between supply and demand is „is very tight right now,” said Birol.

Russia also supplies a quarter of Europe's natural gas, mainly though Ukraine. The flow was stopped a year ago during a transit dispute with Ukraine similar to the current one with Belarus, leading to shortages in Germany, France and other EU countries. The oil dispute with Belarus comes on the heels of another energy conflict between the two former Soviet partners. In the last minutes of 2006, Belarus succumbed to Gazprom's demands to pay twice as much for gas this year, barely averting a cutoff. During the negotiations leading up to the gas agreement, Russia imposed a duty of $180 a ton on crude exports to Belarus, complaining that its former Soviet partner was buying crude at Russian domestic prices and reselling refined products on world markets. Belarus retaliated with a transit tax of $45 per ton on crude shipped through Druzhba. Transneft shut off deliveries earlier this week after saying Belarus had siphoned off oil as payment in kind for the transit tax. (Bloomberg)