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. Last Updated: 07/27/2016

Oil Traders See Cuts In Supplies to Estonia

ST. PETERSBURG -- Russia will drastically cut oil product exports via Estonia in the coming month or two, traders said Friday, as the European Commission urged companies to keep to their supply obligations.

One industry source said rail exports to Estonia would be cut by 2 million tons in the next one to two months. That would be the bulk of trade on the route, which carries 25 million tons per year, one-quarter of the country's oil products exports.

"Cargo owners are redirecting deliveries to the river, to St. Petersburg," the source said.

Russian Railways, or RZD, has denied closing the railway route to Estonia.

An RZD spokeswoman said Thursday that traders were assuming wrongly that maintenance on the line -- part of planned annual repairs -- was a part of a political row between Moscow and Tallinn. Nobody at RZD was available to comment late Friday.

The apparent supply cut coincides with protests in Moscow over Estonia's relocation of a Soviet war memorial and could revive Western fears of the Kremlin using its energy influence as a political weapon against its former Soviet neighbors.

Russian supplies of gasoline, diesel and fuel oil sent via Estonia, are re-exported to northern Europe.

The European Commission called Friday on Russian firms to meet their obligations to deliver energy supplies to Estonia regardless of technical problems.

Estonian Foreign Minister Urmas Paet wrote in an article in a Swedish daily newspaper that Russia was acting as if the Soviet Union still existed. Estonia has previously received support in its dispute with Moscow from the United States and NATO.

One oil trader said the Yaroslavl and Moscow refineries, which traditionally export fuel oil via Estonian ports, were not going to use the route for several weeks.

The Yaroslavl refinery is jointly owned by Gazprom Neft, the oil arm of Gazprom, and TNK-BP. The Moscow plant is also partly owned by Gazprom Neft.

The same trader also said TNK-BP's Ryazan refinery had redirected diesel to the Mediterranean from the northern European market.

Traders said the fuel, traditionally in demand in northern Europe, was likely to be sold at a discount in southern Europe, where high quality diesel is in less demand.

Russia exported 1.87 million tons of refined oil products via Estonia in March.

The port of St. Petersburg is expected to handle the cargoes redirected from Estonia, which may push its 2007 volumes above the planned 12 million tons, a port source said.