Putin tries to calm EU oil jitters to restore confidence in Russia as oil supplier

An unyielding President Vladimir V. Putin on Tuesday raised the possibility of diverting oil transit routes away from Belarus, a day after Moscow cut off pipeline deliveries of crude oil headed to customers in Eastern and Central Europe through the country.

Such a change, which would be years in the making, would cut Belarus out of any role in the transshipment of oil to Europe without offering the customers any immediate assurance that their supplies were reliable.

The two-day cutoff has affected supplies to Ukraine, Germany, Poland, Hungary, the Czech Republic and Slovakia. It is the second stoppage of Russian energy supplies to European countries since last winter, when natural gas shipments were shut down briefly during a gas pricing dispute between Russia and Ukraine.

In a meeting with his cabinet ministers, Mr. Putin also urged the government to discuss with Russian companies “the possibility of scaling down the extraction of oil, given problems in transiting crude across Belarus.” That indicated that Russia might not have sufficient storage for oil that was being produced but not exported, the New York Times reports.

Russia's state pipeline monopoly, Transneft, may sue the government in Minsk, which Moscow accuses of forcing the closure by stealing oil from the pipeline.

Russia, the world's second largest oil exporter, is actively looking to expand business beyond its borders. In Britain, Gazprom, the Russian state-owned gas company, is strongly rumoured to be interested in acquiring a stake in Centrica, the largest gas supplier.

But the Russian leader's comments will only do so much to calm jitters in the EU, which is forecast to rely on Russia for 70 per cent of its energy by 2030.

Angela Merkel, the German chancellor, said the crisis destroyed confidence in Russia as a supplier of oil and natural gas, telegraph.co.uk reports.

Russia's economics minister German Gref told the meeting that the duty being charged by Belarus is neither an import nor an export duty, but rather a payment invented by the country. He called the levy unprecedented, and said it contradicts intergovernmental agreements.

Finance Minister Alexei Kudrin said the new oil export duty Russia is charging Belarus is set to bring around $4 billion to the Russian budget, which has lost between $3.5 billion and $4 billion annually over the last five years.

"Earlier, we were unable to receive the funds because of the need to pursue integration processes (with Belarus)," Alexei Kudrin said.

President Putin said the government should "discuss with Russian companies the possibility of reducing oil production."

Russia currently exports some 20 percent of its crude via the Druzhba pipeline to Europe , and the loss of that route could leave Russia with an oil surplus, Ria Nonosti reports.

Source: agencies

Prepared by Alexander Timoshik

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Author`s name Alex Naumov