- The Washington Times - Wednesday, January 10, 2007

MINSK, Belarus (AP) — An oil pipeline dispute that caused relations between Russia and Belarus to plummet and sparked concern across Europe edged toward resolution yesterday, as the Belarusian government backed down and canceled a transit tax on Russian oil shipments.

A top Kremlin official said the decision was “cause for restrained optimism,” but it was not clear when pumping would resume across the 2,500-mile-long Druzhba pipeline network, which supplies Germany, Poland and other East European nations.

The spat between the two formerly close, ex-Soviet republics exposed the Belarusian regime’s reliance on cheap Russian energy imports and stoked doubts in European capitals about Russia’s dependability as an energy supplier.

“The disruptions in oil supplies have yet again undermined Russia’s efforts to establish itself as a reliable source of fuel supplies to Europe,” Deutsche UFG analysts wrote.

The dispute, in its third day, centered on Russia’s decision last month to impose a hefty duty on oil exports to Belarus, with Moscow complaining that the previous duty-free regime cost the Russian budget up to $4 billion a year in lost revenue. Belarus reaped billions of dollars in revenue by refining cheap Russian oil products and selling them at hefty profit to European markets.

Minsk, whose centrally controlled economy is heavily reliant on cheap Russian energy and duty-free trade with Russia, responded last week by slapping a tax of $45 per ton on Russian oil pumped across Belarus to Europe.

On Monday, Russia stopped pumping oil to Europe via the Druzhba pipeline — whose name translates as “friendship” — and accused its neighbor of siphoning off oil. By Tuesday, the stoppage had affected supplies to Ukraine, Germany, Poland, Hungary, the Czech Republic and Slovakia.

With the European Union voicing alarm and criticism and Russia threatening a trade war against its former ally, the two countries’ presidents — Vladimir Putin and Alexander Lukashenko — held talks by telephone yesterday.

Soon afterward, Belarus’ government announced the cancellation of the $45-per-ton duty, and Prime Minister Sergei Sidorsky announced he would fly to Moscow today for meetings with his Russian counterpart.

“I hope that within two days we will be able to overcome all disagreements — on oil, oil products and other sensitive groups of commodities on the Russian and Belarusian markets,” he said.

In Moscow, Kremlin spokesman Dmitry Peskov said the announcement was “cause for restrained optimism” and that more talks between the two sides were expected.

Mr. Putin’s top economic adviser, meanwhile, asserted that Russia was a dependable energy supplier. “We act as a reliable partner, and we would like to do so in the future,” Igor Shuvalov said.

“We need to understand that that kind of behavior, very close to blackmailing, can’t be accepted by the Russians.

“If we do accept it this time, then the future can’t be secured,” he said. “Now we need to act together, the Europeans and the Russians, to avoid this kind of situation in the future.”

European Union leaders have strongly criticized the disruptions, which came one year after a price dispute between Russia and Ukraine led to a brief interruption of EU natural-gas imports from Russia.

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