Vainshtok: Europe 'Overfed' on Russia Oil

MOSCOW (AP) - The head of Russia's pipeline monopoly said in an interview published Monday that Europe was "overfed" on Russian oil and that a new oil pipeline to Asia would see a portion of supplies diverted from Europe.
By diversifying its markets, Russia could raise the price of its Urals blend of crude for the ferociously competitive European market, Semyon Vainshtok of OAO Transneft said. Analysts say the blend now is sold as much as US$7 (euro6) cheaper than other similar-quality blends.

"We have overfed Europe with oil," Vainshtok told the Nezavisimaya Gazeta daily. "Any economics textbook will tell you that when you have an excess of supply, the price will fall."
But he said the company is currently unable to redirect oil exports to Asia due to the lack of infrastructure. "There is no way to decrease supply -- all of our export is oriented toward Europe," he said.
However he added: "As soon as we turn toward China, South Korea, Australia and Japan, that will take some oil from our European colleagues."
The comments come a week after Russia's natural gas monopoly, OAO Gazprom, spooked Europe -- which depends on Russia for half its gas imports -- by saying it could favor Asian markets for its gas in the future if the company is not allowed to expand in Europe.
However, Gazprom has insisted it will honor all its contracts in full, and denies that the statement was meant as an ultimatum.
Igor Shuvalov, President Vladimir Putin's aide in charge of relations with the G-8 nations, also downplayed the issue Monday, explaining that Russia was seeking new markets as a logical step to diversify its customer base.
"It isn't good for Gazprom to depend on (the EU) for 90 percent of its revenue," Shuvalov was quoted as saying in London by Dow Jones Newswires, adding that the company needed to "avoid the dictatorship of the single consumer."
Shuvalov explained that, from Russia's perspective, energy security must mean security of demand as well as of supply.
Construction on a 1.6 million-barrel-a-day pipeline that is to run in the first stage from Siberia's Irkutsk region to a town in the Amur region on the Chinese border -- and eventually onto Russia's Pacific coast, opposite Japan -- is due to begin in April, Vainshtok told the newspaper.
Russia is the world's second largest crude exporter, after Saudi Arabia.
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