Russia warns of oil supply cut

Russia warned it may cut off oil supplies to Slovakia, Hungary and the Czech Republic because of a dispute with Ukraine over transit of the commodity, the Slovak government said.

Russian Energy Minister Sergei Shmatko notified the European Union of the possible stoppage, the Slovak government said in a statement today, citing an official letter it received from the European Commission, the EU's executive body.

Slovak Prime Minister Robert Fico called an emergency meeting of the country's Security Council to discuss the warning.

Meanwhile, Russia's pipeline monopoly blamed Ukrainian politicians for setting new "unacceptable" terms for oil transit via the port of Yuzhny, saying it will cut supplies if no quick deal is reached. Transneft President Nikolai Tokarev told Reuters Ukraine had asked Russia to pay more for transit and raised additional conditions concerning minimal volume guarantees.

"We cannot and are not accepting tough terms. The [negotiation] process is continuing and I hope we will solve it before the New Year. But if they insist on their terms, we will also review the prospects of supplies," he said.

Asked about the cause of the dispute, Tokarev said: "These are purely political issues there [in Ukraine]."

Ukraine will hold presidential elections in January and analysts have said if a relatively pro-Russian leader is elected Moscow is likely to take a more accommodating stance in future energy negotiations.

Traders told Reuters on Friday Transneft had told them it would scrap the initial January programme for Yuzhny consisting of 0.5 million tonnes. Oil firms will have to divert crude meant for Yuzhny to other destinations.

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