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. Last Updated: 07/27/2016

RZD Halts Exports of Oil Products To Estonia

Russian oil firms rushed Wednesday to reroute one-quarter of their refined products exports away from ports in Estonia after Russian Railways, or RZD, halted the route amid a political dispute with Tallinn.

The political crisis between Russia and Estonia sparked by the dismantling of a Soviet-era statue is fast threatening economic relations between the two countries, with Russian calls for sanctions growing louder.

Oil traders said the state railway monopoly was not accepting volumes slated for May shipment and they were looking now at Russian Baltic Sea ports and Ukraine's Black Sea outlets as alternative destinations.

Russian coal exporters also said May exports of steam coal via Estonia had been effectively halted due to a shortage of rail wagons after RZD told them they must use their own rail wagons, not RZD's, but it had not been possible to find alternative wagons. Up to 900,000 tons of May exports could be lost as a result, they said.

"It was bound to happen given the recent political dispute. And there is nothing new in the Russian reaction. Just look at the examples of the neighboring Latvia and Lithuania," said a trader with a Russian oil major.

Oil pipeline monopoly Transneft blamed lack of pipeline capacity when it stopped oil flows to Latvia's Ventspils in 2003. Last year, Transneft cut supplies to Lithuania, citing a pipeline leak but the move coincided with the sale of the Mazeikiu oil refinery to a Polish firm and not to a Kremlin-backed company.

Russia ships one-quarter of its refined product exports -- or about 25 million tons of fuel oil, gas oil and gasoline -- via Estonia's ports of Tallinn and Muuga for re-export to world markets.

RZD denied the move had any political motivation. "We haven't imposed any economic sanctions against Estonia and have no plans to do so. But from May 1, we plan repair works. We therefore plan to change the delivery schedule," a spokeswoman said.

The export of oil products through Estonia is controlled by Severstaltrans and Gunvor, a Swiss company said to be linked to Gennady Timchenko, co-owner of Bank Rossiya, Kommersant said Wednesday.

The head of the National Meat Association, Sergei Yushin, on Wednesday reiterated calls for a boycott of Estonian meat imports, and said such a boycott would help Russian meat producers gain a bigger share of the domestic market.

Supermarket chains, including Sedmoi Kontinent and Kopeika, have stopped selling Estonian goods.

Bilateral trade between Russia and Estonia was $2.75 billion from January to November 2006, Kommersant reported Wednesday, citing Federal Customs Service figures.

As far away as Kamchatka, stores have announced a boycott of Estonian goods, hanging notices that read: "Estonian goods are not sold here," RIA-Novosti reported.

Some experts said, however, that imposing economic sanctions against a small country such as Estonia was an exercise in futility.

Dmitry Yanin, head of the Moscow-based International Confederation of Consumer Federations, said that Estonia could switch to other trading partners.

"Whether you're talking about Cuba or Georgia, sanctions have never been effective in limiting economic growth," Yanin said.

Reuters, MT