Last Updated: Monday, 8 January 2007, 11:32 GMT

Russia oil row hits Europe supply

[color="Navy"]A gas price row triggered the dispute between the two countries
Belarus has halted Russian oil supplies to Poland, Germany and Ukraine after a trade row with Moscow escalated.
[color="navy"]Disruptions hit Transneft's Druzhba pipeline overnight before supplies were severed completely at Poland's border with Belarus, Polish officials said.

The problems arose after Belarus began legal action against Transneft for failure to pay a new oil shipment tax on oil supplies piped through Belarus.

It signals the latest twist in an energy row between Belarus and Moscow.

The dispute began after Russian energy giant Gazprom forced Belarus to accept a huge increase in the price of Russian gas.

Russia has called for an end to the oil shipment tax saying it threatens supplies to Europe.

Supplies interrupted

Every day Russia transports about a fifth of its oil exports - or one million barrels - through Belarus, mainly to refiners in Poland and Germany.

Europe's gas pipeline network

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"[color="navy"]Oil supplies via the Druzhba pipeline to Poland and Germany were halted overnight. We sent a letter to Belarus asking for explanations," said Tomasz Zakrzewski, a spokesman for Polish pipeline operator PERN.

Poland's deputy economy minister added that the supply problems were a result of the trade row, while adding that the country had sufficient oil reserves for 80 days.

Germany also said supplies to its Leuna and Schwedt refineries in eastern Germany had also been halted.

However, officials in Minsk declined to comment on the situation, saying all questions should be directed to Transneft.

Meanwhile, Transneft said it was doing all it could to boost supplies from via other routes.

Relations sour

Further reports suggested that the company had also accused Belarus of siphoning off Russian oil destined for Europe from the pipeline.

[color="navy"]The cut off in oil supplies is the latest twist in a row between Moscow and Minsk over energy prices.

[color="navy"]Last week Belarus said it would charge Russia $45 (£23) per tonne of oil that passed through its country.
The tit-for-tat tax move was introduced by the Belarusian government days after the country was forced to accept a doubling of Russian gas charges - from $47 to $100 - when Moscow threatened to cut supplies if Belarus refused to agree new prices.

News of the disruption to supplies was a key factor helping to drive oil prices closer to the $57-a-barrel mark on Monday after falling to around the $55 level last week.

US light sweet crude rose 60 cents to $56.91 a barrel in early trade, while in the UK Brent crude stood at $56.43 - up 79 cents.

News that Saudi Arabia, the world's largest oil producer, planned to cut output also helped to drive crude prices higher.

Saudi Arabia said it would cut output by 158,000 barrels a day from 1 February - in line with the latest production cuts set out by oil cartel Opec in an effort to boost prices

http://news.bbc.co.uk/2/hi/business/6240473.stm