Supplies resumed

Russia has restarted shipping oil to refineries in Belarus, after halting supplies briefly on the first of January over a financial dispute.

"We yesterday started shipments to Belarusian refineries," Interfax news agency quoted Russian Deputy Prime Minister Igor Sechin as saying on Monday.

"We are continuing uninterrupted transit to western European customers," he added.

Belarusian officials also said on Monday that oil processing plants in the country were still running and currently receiving Russian oil deliveries.

"Unreasonable demands" from both sides

On the first trading day of 2010, news that Russia had halted oil supplies to neighboring Belarus pushed oil prices up 0.9 percent, to $80.10 a barrel.

The stop in supplies seemed a continuation of what has become a January tradition: Russia and a bordering country fail to agree on terms for energy transport before the New Year's Day deadline, and Moscow halts the flow of energy.

Both Belarusian and Russian officials had accused the other of making "unreasonable demands."

A statement released on Sunday by the Belarusian cabinet accused Russia of exposing Minsk to "absolutely unfounded and unacceptable pressure." It said Russia's demand that Belarus pay an increased tax on oil contradicted agreements signed last fall.

But Transneft, Russia's oil pipeline monopoly, said Belarus was trying to get a hold of the Russian crude oil duty-free. "They want to receive it for free, process it and then send it abroad," a Transneft official said.

Moscow maintains that it is only trying to establish normal market terms after years of providing its neighbors with subsidized energy.

Worries of repeat disruptions for western Europe

Most of the crude oil that arrives in Belarus is refined by the Naftan and Mozyr refineries and then re-exported to the West. Only a small portion of the refined oil is used by Belarus itself.

In retaliation for Russia's price hikes, Belarus has threatened to increase tenfold the transit fee it charges to move Russian oil to Germany and Poland.

This could lead to a disruption of supplies to those countries, something many Europeans are already worried about, following the cut to Belarus' deliveries.

A similar price disagreement in January 2007 led Russia to halt the flow of oil to Belarus. That year supplies to Germany and other European Union countries were cut for several days.

The Druzhba oil pipeline that crosses Belarus feeds about 15 percent of Germany's oil needs and 75 percent of Poland's.

A spokesman for Russian Prime Minister Vladimir Putin said the recent row with Belarus would not affect supplies to the West and that if there were supply interruptions, it would "not be Russia's fault."

Putin was also quoted as saying he hoped to clinch a long-term oil supply deal with Belarus in the near future.

glb/AFP/AP/Reuters/dpa

Editor: Susan Houlton