UPDATE 1-Russia says Czech oil supply cut "not political"

Mon Jul 14, 2008 3:40pm BST

(Updates with Russian comment, adds background)

By Yelena Fabrichnaya

MOSCOW, July 14 (Reuters) - Russia said on Monday it cut oil supplies to the Czech Republic last week for technical reasons, and denied it was linked to Prague's role in a U.S. missile defence shield.

"Trade with the Czech Republic or other traditional partners is in no way linked or connected with resolving the problem of deployment" of missile shield components, Deputy Foreign Minister Sergei Kislyak told reporters.

Russian pipeline monopoly Transneft said supplies to the Czech Republic via the Druzhba pipeline dropped by half last week only because two Russian firms had decided to refine more crude at home.

"It is in no way linked to politics. It is pure commerce," Interfax quoted Transneft Vice-President Mikhail Barkov as saying on Monday.

The cut to crude flows from Russia, the Czech Republic's main supplier, came after Prague agreed to host a radar station as part of a U.S. missile shield fiercely opposed by Moscow.

"I want to believe that the reasons which the Russian supplier states are only technical," Czech Prime Minister Mirek Topolanek said on Monday.

"The government is not going to take any steps because at the moment there is no threat for the citizens, thanks to diversification of supplies," he said.

Russia is staunchly opposed to the missile shield plan involving its former Soviet-era satellites, saying it poses a direct threat to its own security.

Moscow has said it would point missiles at the Czech Republic and Poland -- another possible site for shield components -- if the deployment goes ahead.

GAS WORRIES

Moscow has in the past cut gas supplies to Ukraine in a pricing dispute and subsequently reduced deliveries of gas to the European Union, prompting the United States to call on Russia to stop using energy as a tool of blackmail.

The Russian oil export schedule for the second, third and fourth quarters lists mid-sized oil firms Tatneft TATN3.MM and Bashneft as the key suppliers. Both declined comment on Monday.

Industry sources said on Friday that Tatneft had reallocated some crude volumes to domestic sales, thus reducing exports.

If the reduction in supply were maintained until the end of the month, crude oil deliveries in July to the Czech Republic would be about 200,000 tonnes below the planned 500,000 tonnes.

Czech Industry and Trade Ministry spokesman Tomas Bartovsky said that if Russia wanted to hurt the country, cuts in gas flows would do more harm as supplies were less diversified.

But he noted: "Gas supplies have not been reduced by a single cubic metre."

The main Czech refiner Unipetrol UNPEsp.PR said at the weekend it had begun tapping state oil reserves and raising deliveries through the IKL pipeline, which hooks up to a west European pipeline system in Germany.

The Czechs built the link in the mid-1990s to diversify their energy sources, but still take 5.5 million tonnes of crude, of their 7.7 million annual needs, via the Druzhba pipeline from Russia.

Bartovsky said Russia was expected to announce August supply volumes on Tuesday, which would show whether lost volume would be compensated for. The Czech Republic has about 95 days of reserves of oil and oil products. (Reporting by Jan Lopatka and Jana Mlcochova; Editing by Jon Boyle)