Russia halts oil flow to EU as Belarus row escalates

Russia halted the delivery of oil to Europe via Belarus yesterday as an acrimonious row between the two countries escalated, raising fears of oil shortages in at least five countries.

Transneft, Russia's state-controlled pipeline operator, said it had been forced to shut its 2,500-mile Druzhba pipeline, one of the world's longest, because of a pricing dispute with Belarus which has brought relations between the two neighbours to a 15-year low.

Transneft claimed Belarus had started stealing Russian oil intended for European customers and accused its neighbour of imposing an illegal transit fee on its exports.

"On 6 January the Belarussian side without any warning unilaterally started the illegal tapping of oil from the Druzhba pipeline designed solely for the transportation of oil to consumers in western Europe," said Semyon Vainshtok, president of Transneft.

"Nine hundred tonnes of oil have been illegally tapped from the pipeline in the last 24 hours alone ... and a total of 79,000 tonnes since 6 January."

The implications of a prolonged shutdown are serious. Druzhba carries around one fifth of Russia's oil exports to Europe (about one million barrels a day), supplying countries such as Germany, Poland, Slovakia, the Czech Republic and Hungary.

Soon after yesterday's shutdown, Poland, Germany and Hungary all reported that they were no longer receiving Russian oil.

However the European Commission claimed that strategic reserves meant there was no need to panic. The EU energy commissioner Andris Piebalgs said there was "no immediate risk" to European supplies.

The row follows the Kremlin's decision to stop supplying Belarus, a traditional ally, with cheap oil and gas. Faced with the prospect of having its gas supply switched off on 1 January, Belarus reluctantly agreed to a doubling of the price it pays for Russian gas - from $47 (£24) per 1,000 cubic metres to $100.

Moscow also sharply raised the price that Minsk pays for Russian oil, imposing a $180 per tonne customs duty which threw Belarus's oil refining industry into crisis.

Before 1 January, Belarusian refiners were buying Russian crude oil cheaply, refining it, and then selling it on to other countries at huge profit. However President Vladimir Putin is thought to have grown weary of subsidising the hardline government of President Alexander Lukashenko, and has in effect withdrawn the Kremlin's multibillion-pound support overnight.

Belarus reacted furiously. President Lukashenko has threatened to review arrangements governing Russian military facilities on Belarusian soil and imposed a transit fee on Russian oil exports of $45 per ton. He has accused Moscow of using its energy resources to try to bully him into a long-mooted union of the two countries on terms favourable to the Kremlin.

"Energy resources cannot be used to blackmail our people," he said on Sunday. "Someone is trying to downgrade our energy-poor country to its level 10 years ago. [But] sovereignty and independence cannot be bought for natural gas or oil."

The dispute is reminiscent of a row between Russia and Ukraine in which Moscow cut gas supplies for a few days, but with one crucial difference; Belarus unlike Ukraine has few friends in the international community. A Belarusian delegation was on its way to Moscow last night for emergency talks. Amid talk of a trade war, Minsk denied interfering with Russian oil exports. The dispute is bound to renew European fears of overdependence on Russian energy supplies.