MOSCOW — A dispute between longtime allies Russia and Belarus over oil taxes escalated Monday, leading to a cutoff in the flow of crude oil through a pipeline serving European customers.
Officials in Minsk, the Belarusian capital, issued conflicting statements as to whether Belarus had intentionally cut off the flow of oil through the Druzhba (Friendship) pipeline, which crosses Belarus to link Russia and the European Union. Later in the day, Russia said it had stopped supplying oil to the pipeline, blaming Belarus for the move.
"I would like to stress that Belarus was the first to suspend the transit of Russian oil intended for third countries via its territory," Andrei Sharonov, Russia's deputy trade and economic development minister, said in an interview with Vesti-24 television. "Russia moved to suspend supplies to Belarus in response."
The incident reignited a debate about the reliability of Russia as an energy supplier. The European Union relies on Russia for about 40% of its natural gas imports and about 30% of its oil imports. Russia is the world's largest exporter of natural gas and the second-largest oil exporter, after Saudi Arabia.
News of Monday's pipeline shutdown initially drove oil futures higher in New York and London as traders worried about energy shortages. But the rally couldn't be sustained on the New York Mercantile Exchange because warm weather in the U.S. has put a damper on demand for petroleum products, and crude for February delivery closed Monday at $56.09 a barrel, off 22 cents. In London, the European benchmark Brent crude fell 4 cents to $55.60 a barrel.
"We have much more of a cushion in crude and gasoline supplies than we had last year after the hurricanes in the Gulf [of Mexico]. That cushion is offering a little bit of a buffer to these stories," said Phil Flynn, vice president and senior market analyst for Alaron Trading Corp. in Chicago.
The oil dispute was triggered by Russia's new customs duty of $180 per metric ton on oil exports to Belarus. The tax took effect Jan. 1. Belarus retaliated by imposing a charge of $45 per ton for oil shipped through the pipeline to the European Union, which Minsk initially called a customs duty but now describes as a transit fee.
The oil dispute erupted immediately after Moscow and Minsk worked out a last-minute New Year's Eve deal ending an argument over natural gas prices. Belarus yielded to a Russian demand to pay in the new year slightly more than double the 2006 price. Belarusian officials had expressed unhappiness with that deal, which averted the threat of a midwinter disruption of gas supplies to European customers.
