Oil and Gas

UPDATE 2-Russia, Belarus solve milk row but gas row looms

* Russia-Belarus “milk war” ends, gas row looms

* Minsk says can impose strict customs controls again

* Belarus delays recognition of Abkhazia, South Ossetia

(Writes through, changes sources, details, previous MOSCOW)

By Dmitry Zhdannikov and Andrei Makhovsky

MOSCOW/MINSK, June 17 (Reuters) - A row over a ban on imports of Belarussian dairy goods to Russia was resolved on Wednesday, but Moscow demanded payment from Minsk of $230 million in gas arrears.

The milk row further damaged relations between the two Slav neighbours who have long pledged but failed to build a “union state”.

Belarus on Wednesday lifted its day-old strict customs controls imposed on roads to Russia after Russia scrapped its ban on dairy product imports from Belarus.

But Minsk signalled it can again resort to strict controls.

“Today the implementation of strict customs controls was suspended. Depending on how the situation develops, the customs committee can take this or that decision,” Natalya Petkevich, deputy of the Belarussian president’s staff, told reporters.

Russian television channels showed Gennady Onishchenko, Russian chief health official, saying, “A protocol satisfying the Belarussian and Russian sides has been signed.”

“The movement of Belarussian milk will be restarted across our border very soon,” said Belarussian Agriculture Minister Semyon Shapiro.

Although the milk war may be ending, energy issues remain an irritant.

Russia's gas export monopoly Gazprom GAZP.MM has demanded Belarus pays $230 million in arrears for gas supplies so far this year, said Vadim Gusev, spokesman for the Russian embassy in Minsk.

Russia supplies a quarter of Europe’s gas needs mainly via the territory of Ukraine but also via Belarus, which is a key transit route for Russian gas to Germany and Poland.

Russia froze a $500-million loan to Belarus last month. Lukashenko said Moscow refused the money because he turned down Kremlin demands to recognise the breakaway Georgian regions of Abkhazia and South Ossetia as independent states.

The latest spat between the neighbours came to a head on Sunday when Lukashenko snubbed the Kremlin by pulling out of a security summit after Moscow banned Belarussian dairy products on health grounds.

Russian President Dmitry Medvedev then called for an end to Belarus’s “hysterics”. Russia toned down its rhetoric on Monday, and Prime Minister Vladimir Putin told his cabinet not to say anything that might upset Minsk. (Writing by Dmitry Solovyov; Editing by Louise Ireland)