BELARUS NEWS AND ANALYSIS

DATE:

11/01/2007

Russian, Belarusian prime ministers meet

By MIKE ECKEL

MOSCOW

Russia's prime minister met for talks with his Belarusian counterpart Thursday, hours after Russia resumed pumping oil to Europe via Belarus and ended a three-day suspension that stoked doubts in European capitals about Moscow's dependability as an energy supplier.

Speaking before meeting with Belarusian Premier Sergei Sidorsky, Mikhail Fradkov said he hoped for a "balanced and understandable solution" to the formerly close allies' outstanding differences. In televised comments, Fradkov also acknowledged that the row had tarnished Russia's reputation.

"The image of Russia as a reliable supplier of energy resources has suffered as a result of the dispute," Fradkov said.

"The two sides have been given a not-so-simple mission by our presidents: to conduct negotiations to their logical conclusion," he said.

Earlier Thursday, Russian state controlled pipeline operator OAO Transneft said that it had started deliveries to Germany and a number of Eastern European countries through Belarus at about 8:30 a.m. (0530 GMT).

This followed a resumption of supplies late Wednesday by Belarus, which was compensating Russia for 79,000 metric tons (87,000 tons) of crude that it had illegally siphoned off, Vice President Sergei Grigoriyev told The Associated Press.

By Thursday morning, European nations affected by the pipeline shutdown, including Germany, Poland, Slovakia and Hungary, had confirmed the resumption of Russian oil supplies.

German Foreign Minister Frank-Walter Steinmeier, whose country holds the rotating EU presidency, said he was pleased that the bloc's appeal "to find a quick and constructive solution to the oil conflict was not unheard in Moscow."

"Given this background, we would now like to open a dialogue with Russia in order to establish our future energy relations on a reliable, enduring basis," he said.

Belarus' isolated regime climbed down in the dispute, facing the threat of a full-scale trade war with its powerful neighbor, to which its economy is closely tied.

But the cutoff of Russian oil, only a year after a Russian dispute with Ukraine briefly disrupted Europe's gas supply, deepened EU concerns about its dependance on Russia for a quarter of its oil and over two-fifths of its natural gas.

The spat centered on Russia's decision last month to impose a hefty duty of US$180 (euro138) per ton on oil exports to Belarus, with Moscow complaining that the previous duty-free regime cost the Russian budget up to US$4 billion (euro3.1 billion) a year in lost revenues. Belarus reaped billions in revenues by refining cheap Russia oil products and selling them at hefty profit to European markets.

Minsk, whose centrally controlled economy relies on cheap Russian energy and duty-free trade with Russia, responded last week by slapping a US$45 per ton tax 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 in lieu of the duties. By Tuesday, the stoppage had affected supplies to Ukraine, Germany, Poland and other East European nations.

With the European Union voicing alarm and Russia threatening crippling trade retaliation against its former ally, the countries' presidents held talks by telephone Wednesday. Soon after, Belarus' government announced the cancellation of the US$45-per-ton duty.

It remained unclear, however, what Russia had promised in return.

In Europe, leaders criticized Russia for the sudden pipeline shutdown, which has renewed calls for a diversification of EU energy supplies.

Source:

http://www.businessweek.com/ap/financialnews/D8MJ98U01.htm