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. Last Updated: 07/27/2016

Azeris Halt Oil Exports to Europe Via Russia

Azerbaijan has stopped exporting oil to Europe via a Russian-controlled pipeline, raising the stakes in an energy dispute with Russia.

The decision, announced Monday, came after Azerbaijan ended its imports of Russian gas because Moscow was demanding a more than twofold increase in the price this year.

Azeri state oil company Socar said the crude would be used domestically instead, as fuel for power stations.

"As power stations in Azerbaijan are switching over to fuel oil, the need for it has increased. Hence, we have stopped oil exports and refine all the crude," a company spokesman said, Interfax reported.

Last year, Socar exported 1.17 million tons of oil via the Russian-controlled pipeline running from Baku to the Black Sea port of Novorossiisk.

An international consortium led by BP that is developing offshore oil fields in Azerbaijan will continue to use the Baku-Novorossiisk pipeline in addition to a new U.S.-backed pipeline running from Azerbaijan to Ceyhan, Turkey, known as the BTC.

Azerbaijan, which has its own substantial oil and gas reserves, imported about 4.5 billion cubic meters of natural gas from Russia in 2006 to cover domestic consumption. But the country refused to meet Russia's demand that it pay $235 per 1,000 cubic meters of gas -- up from $110.

Russia demanded a nearly identical increase in natural gas prices for Georgia. Unlike Azerbaijan, Georgia has no energy resources of its own and accepted the price increase -- though reduced its level of Russian gas imports.

Azerbaijan, meanwhile, is to start shipping natural gas to Georgia on Wednesday.

Deliveries will reach around 3 million cubic meters of gas per day in the first week to compensate for the failure to supply 1 million cubic meters per day as agreed late last year, the Georgian Energy Ministry said Tuesday.

In view of the hike in the cost of Russian gas, Georgia is looking to increase its future acquisitions of gas from Azerbaijan, the Georgian Energy Ministry said Monday. But this is not currently possible due to technical difficulties with Azeri fields. Gazprom will remain Georgia's primary supplier of gas this year, with four of the country's largest industrial consumers having signed an agreement to buy 1.46 bcm of gas at a rate of $235 per thousand cubic meters, Interfax reported.

Both Azerbaijan and Georgia have developed close ties with the United States, and some observers see the sharp price increase as punishment. But Russian officials say they are trying to put their gas sales on a market basis and eliminate the subsidies they have provided former Soviet republics for years.

Also on Monday, the Azeri government sharply raised the domestic prices for gas at the pump, electricity, water and natural gas for industrial use. Electricity charges went up threefold, water prices increased 1.8 times and gas prices at the pump by 50 percent, the Economic Development and Trade Ministry said.

(AP, MT)