Belarus climbs down, Russian oil may flow soon

MOSCOW/MINSK, Jan 10 (Reuters) Russia and Belarus neared a deal today to resume oil supplies via a major export pipeline, as Minsk removed a transit duty that had angered Moscow.

European customers said crude could start flowing within hours.

Belarussian President Alexander Lukashenko reached an understanding to resolve the three-day-old halt to the Druzhba ('Friendship') pipeline during a telephone call with Kremlin leader Vladimir Putin, Lukashenko's office said.

''As a result of the discussion, a compromise was found which will make it possible to unblock this dead-end situation,'' it said in a statement.

Moscow angered the European Union by cutting off all oil supplies on Sunday night through Druzhba, which carries 1.5 million barrels per day of crude oil from Russia through Belarus to Europe -- about ten percent of the EU's needs.

Belarussian Prime Minister Sergei Sidorsky said late on Wednesday that Minsk had withdrawn an oil transit duty it imposed last week, meeting Russia's main demand for ending the dispute. His deputy Andrei Kobyakov said Druzhba would resume operations very soon.

Sidorsky will fly to Moscow on Thursday and he said he expected the Russian side to respond by lifting the trade restrictions it has imposed on Belarus.

A Russian official welcomed the lifting of the duty but said Moscow wanted Belarus to give back some 80,000 tonnes of oil, which it says was taken by Minsk during the dispute, before restarting oil flows via Druzhba.

''If Minsk starts pumping this crude towards Europe, Russia is ready to resume supplies from its territory within four hours,'' Deputy Economy Minister Andrei Sharonov told reporters.

EU leaders said the stoppage made it harder to trust Russia as an energy supplier and berated both states for failing to consult key customers like Germany before turning off the taps.

''The cut in oil supplies from Russia is unacceptable...This raises a problem, a real problem of credibility. We would like to guarantee that this does not happen in the future,'' European Commission President Jose Manuel Barroso said.

Claude Mandil, chief of the International Energy Agency that advises industrialised nations, said the disruption had shaken confidence in Russia as affected countries in Europe had to tap their strategic reserves.

Moscow said it was forced to act because Belarus was siphoning off oil from the pipeline, which serves Poland, Germany, Slovakia, Hungary, and the Czech Republic.

CRUDE TO FLOW SOON Belarus took the oil as payment in kind for its transit tax, which in turn was a retaliation by Minsk against a duty Russia imposed on oil exports to Belarus.

Minsk caved into the pressure from Moscow after Putin said yesterday Russian oil firms should prepare to cut production if no compromise was reached over Druzhba.

Russian Energy Minister Viktor Khristenko met oil bosses to discuss the cuts today morning. But the the latest round of talks scheduled for today evening was cancelled.

''If oil pumping restarts before the end of the day... the issue of (Russian) oil production cuts will be off the agenda,'' Sharonov said.

Slovak pipeline operator Transpetrol said it expected full supplies through Druzhba to resume by 2000 IST, citing an agreement between Russia and Belarus.

But Russia's pipeline monopoly Transneft said the oil was not yet flowing.

The dispute between the two erstwhile allies started last year when Russia demanded that Belarus paid more for its heavily subsidised gas supplies and give up control of a key gas pipeline running across its territory.

Just before New Year, Belarus reluctantly agreed to pay just over twice as much for its gas and to sell a 50 percent stake in the pipeline to Russia's pipeline monopoly Gazprom.

Many analysts say Belarus' newly imposed oil transit tax, which triggered the Druzhba closure, was Minsk's reaction to the December gas agreement.

''The disruption in oil supplies has yet again undermined Russia's efforts to establish itself as a reliable source of supplies to Europe,'' said Yaroslav Lissovolik from Deutsche UFG.

Reuters BDP GC2355