Russia may restrict oil deliveries to Western Europe

August 29th, 2008 - 7:03 pm ICT by ANI  

London, Aug 29 (ANI): Fears are mounting across the West that Russia may restrict oil deliveries to Western Europe in the coming days, in response to the threat of EU sanctions and NATO naval actions in the Black Sea.

Any such move would be a dramatic escalation of the Georgia crisis and play havoc with the oil markets, The Telegraph reported.

Reports have begun to circulate in Moscow that Russian oil companies are under orders from the Kremlin to prepare for a supply cut to Germany and Poland through the Druzhba (Friendship) pipeline. It is believed that executives from lead-producer LUKoil have been put on weekend alert.

They have been told to be ready to cut off supplies as soon as Monday, claimed a high-level business source. Any move would be timed to coincide with an emergency EU summit in Brussels, where possible sanctions against Russia are on the agenda.

Any evidence that the Kremlin is planning to use the oil weapon to intimidate the West could inflame global energy markets. US crude prices jumped to 119 dollar a barrel yesterday on reports of hurricane warnings in the Gulf of Mexico, before falling back slightly.

Global supplies remain tight despite the economic downturn engulfing North America, Europe and Japan. A supply cut at this delicate juncture could drive crude prices much higher, possibly to record levels of 150 dollar or even 200 dollar a barrel.

Armed with 580billion dollar of foreign reserves (the worlds third largest), Russia appears willing to risk its reputation as a reliable actor on the international stage in order to pursue geo-strategic ambitions.

We are not afraid of anything, including the prospect of a Cold War, said President Dmitry Medvedev.

Russia has repeatedly restricted oil and gas deliveries over recent years as a means of diplomatic pressure, though Moscow usually explains away the reduction by referring to technical upsets or pipeline maintenance.

Last month, deliveries to the Czech Republic through the Druzhba pipeline were cut after Prague signed an agreement with the US to install an anti-missile shield.

Supplies were cut to Estonia in May 2007 following a dispute with Russia over the removal of Red Army memorials.

A senior LUKoil official in Moscow said he was unaware of any plans to curtail deliveries. The Kremlin declined to comment.

Although Russia would lose much-needed revenue if it cut deliveries, the Kremlin might hope to recoup some of the money from higher prices. Indeed, it could enhance income for a while if the weapon was calibrated skilfully. (ANI)

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