Russia's state railways have ordered exporters to halve shipments of refined oil products, metals and coal via Estonia amid renewed political tensions with Tallinn, industry and trade sources said yesterday.

"There was a meeting chaired by (Russia's First Deputy Prime Minister Sergei) Ivanov and he ordered that transit via Estonia be limited," one industry source said, speaking on condition of anonymity.

A source close to Ivanov denied his boss had ordered the cut and state railways declined to comment. But oil traders said major exporters of refined products on the route had already halved shipments. "It seems very similar to what we had earlier this year, although more exporters are likely to be affected," one source said.

Moscow's relations with Tallinn hit a low in April when Estonia removed the statue of a Red Army soldier from the center of its capital, angering Moscow and prompting state railways to order a complete halt of rail deliveries to Estonia.

The ban was lifted after 10 days. Trade sources warned that if supply disruptions last longer this time, exporters would be hurt by traffic backlogs and supply gluts inside Russia.

Estonia is the transit route for 25 million tons per year of Russian fuel, or around a quarter of the country's total oil products exports. It is also an important transit route for coal, metals, timber and chemicals.

Many Russian politicians have called on state officials to stop re-exports of goods via Estonian ports, while Tallinn has said Moscow should be kicked out of the G8 Group of most industrialized nations for its controversial energy policies.

Problems have eased since May, although small firms had faced problems with gasoline and naphtha exports via Estonia. The new cuts will affect the most important product, fuel oil, mostly used by power stations.

Russian Railways said in June it would cut the number of rail cars plying the Estonia export route to 980 per day from the usual 1,500.

It asked oil products exporters to seek alternative ports in Lithuania and Latvia and requested that timber cargoes go via Finland and coal via Ukraine and Russia's Ust-Luga.
 
Trading sources at Estonian terminals said yesterday they believed the new ban would not last long again.

Russia has drastically cut transit shipments of oil via neighboring states, especially Latvia, Lithuania and Estonia, in recent years after President Vladimir Putin called on the government to stop subsidizing its neighbors with transit fees.

(China Daily via agencies July 18, 2007)