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. Last Updated: 07/27/2016

Oil Flows Through Estonia Cut by 30%

Russia cut exports of fuel oil, diesel and gasoline via Estonia by at least 30 percent in the first 10 days of May, trade sources said Thursday, against the backdrop of the argument over a World War II memorial in Tallinn.

They said shipments of refined oil products were likely to remain capped throughout May and June.

State monopoly Russian Railways, or RZD, said last week that the freight route to Estonia was undergoing regular maintenance, but trading sources said the cut in refined-products supplies was a Kremlin reaction to a dispute with Tallinn over the monument's relocation.

Some firms rushed to reroute the volumes, which had been initially slated for re-export to Europe via Estonia, to other ports. On Thursday, traders said some volumes had been finally cleared for exports via Estonia.

"The main schedule is now being cleared. It means that firms such as Surgut, Gazprom Neft and TNK-BP have been allowed to go to Estonia," a major operator on the route said.

"But the railway is declining to accept any additional schedule for May. I would say additional schedules usually amount to 30 percent to 35 percent of the total," he said.

Estonia's ports of Tallinn and Muuga are the transit points for around one-quarter of Russia's total refined-products exports and are the biggest outlets, far outweighing smaller terminals on the Russian Baltic and Black Sea coasts.

Shipments amount to 25 million tons per year or 390,000 to 480,000 tons per week, according to different estimates and depending on the period of the year.

"The decline in May could be even bigger than 30 percent," a source at one of Muuga's biggest terminals said.

He said he was hearing that the Kirishi refinery near St. Petersburg, which belongs to No. 4 oil firm Surgutneftegaz, was the only exporter to have fully cleared its plan for May.

One trader said that new volumes of fuel oil had been seen out of Kaliningrad and Lithuania's Klaipeda.

"As far as June is concerned, we are hearing that RZD will clear the main plan, but will again decline to accept any additional volumes. They are citing the same reason as in May -- the lack of technical capacity on the route," another trader with a Russian firm said.

Estonian media have quoted industry sources as saying the country's railway firm could cut staff and reduce working hours due to lower cargo shipments from Russia.

"I don't have any forecast for June," said the source at one of Muuga's terminals. "Everybody is waiting for a political decision. It has nothing to do with the economy."

In the course of the dispute over the memorial, Moscow has also imposed other trade curbs on Estonia, though it has denied any political motive.

Restrictions have affected exports of Russian coal.

Russia also canceled a train service and imposed curbs on a road bridge on the main highway into Estonia.