Oil Taps Back On

The oil dispute between Russia and neighboring Belarus, which temporarily disrupted supplies headed to Western Europe and restarted debate over energy security in the European Union, appears to be resolved after the presidents of the two countries reached a compromise Wednesday to end the stoppage.

Russian oil begin flowing again to Europe through Belarusian pipelines on Thursday, with oil from the Druzhba pipeline reaching Poland in the early hours of the morning and Germany just hours later, according to the deputy chief executive of Russian oil pipeline monopoly Transneft, Sergei Grigoryev, quoted by RIA Novosti.

European leaders said the dispute has undermined the EU's confidence in Russia, with the bloc's leaders, including German Chancellor Angela Merkel and Jose Manuel Barroso saying the stoppage has made it harder to trust Russia as an energy supplier. Russia and Belarus have also been criticized for failing to consult key customers like Germany before turning off the taps.

"Even if flow is there, it is important to keep (this) on the agenda because it is also very important to get assurance that it will not happen again," EU Energy Commissioner Andris Piebalgs said.

German Foreign Minister Frank-Walter Steinmeier said the time to talk with Russia over energy security has come.

"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.

Barroso also said he plans to keep the issue a priority. "The cut in oil supplies from Russia is unacceptable," he said. "This raises a problem, a real problem of credibility -- we would like to guarantee that this does not happen in the future."

Power play

One of the main arteries of energy flowing from east to west, the Druzhba pipeline pumps some 1.5 million barrels a day and accounts for around a third of Russian oil exports and some 12.5 percent of total EU oil consumption.

It was shut down unexpectedly as part of a power play between Moscow and the former Soviet republic over prices and control of fuel pipelines.

Supplies to several EU countries halted Monday when Russia refused to pay a new transit tax imposed by Belarus, prompting sharp criticism of the way Moscow was handling the crisis by Merkel, the EU's current president and also chair of the G8 leading economies.

Russia had insisted that before resuming supplies, Belarus should first pump to European customers some 80,000 tons of crude oil it had taken from Russia and stored in lieu of transit fee payments.

Finalizing solution

Belarusian Prime Minister Sergei Sidorsky was due in Moscow later to finalize the resolution agreed in a telephone conversation Wednesday by Russian President Vladimir Putin and his Belarusian counterpart Alexander Lukashenko.

Sidorsky's spokesman Alexander Timoshenko said Minsk had agreed Moscow's main demand for ending the crisis: that Belarus cancel the $45-per-ton (35.70 euros per ton) tax on oil transit through the Druzhba pipeline.

Sidorsky said he "and Russian counterpart Mikhail Fradkov must prepare all issues over the next two days, so that Russia and Belarus can resume trade relations without any exceptions and customs limitations."

New framework

Under the deal to be finalized, Belarus and Russia might agree a new framework for the oil trade underlying the dispute, in which Belarus receives oil from Russia, refines it and sells it on to European consumers, the Vedomosti business daily said Thursday.

Belarus had benefited from getting the oil cheaply from Russia as part of an economic union between the two countries, until Moscow imposed a tax on the exports to Belarus on Jan. 1, prompting the retaliatory tax by Belarus.

To end the standoff the two countries may revert to an older arrangement that existed in the 1990s by which Belarus paid Russia part of the duties it received from exporting oil products to Europe, said Vedomosti, citing unnamed officials.

Diversifying

The resolution to the dispute averted a cut in oil output by Russia, the world's second largest oil exporter after Saudi Arabia, which Putin had warned might be necessary.

But Russian newspapers said that Moscow might still go ahead with imposing new tariffs on a range of Belarusian products, undermining a longstanding plan by the two countries to form a joint state.

In the light of the cut-off, Russia will be looking at ways of diversifying routes for exporting oil to reduce dependence on Belarus, the Gazeta newspaper quoted Deputy Economic Development Minister Andrei Sharonov as saying.

"Russia will diversify the flow of oil supplies -- the situation with Belarus showed the vulnerability of Russian contracts," Sharonov said.