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Blackout fear for EU as gas row escalates

By Nabi Abullaev in Moscow



Russia cut off gas supplies to Ukraine yesterday in a dispute over unpaid bills that rang political alarm bells across the European Union, which imports up to 40 per cent of its natural gas from Russia, the bulk of it through Ukraine.

Jose Manuel Barroso, the European Commission president, called on Moscow and Kiev to solve the dispute as soon as possible. While Gazprom, the Russian energy giant, says it will continue pumping gas to European customers through Ukrainian territory, there are fears that Germany, Italy and other customers could eventually be hit if the dispute escalates. Two years ago, when Moscow cut supplies to Ukraine in a similar dispute, several EU countries experienced gas shortages after Ukraine tapped into the pipelines.

Washington responded to yesterday's shutdown by warning Russia that a "predictable" energy flow to Ukraine was essential. Urging Moscow to restore supplies, a White House spokesman said Russia should bear in mind "the humanitarian implications" of its action. "The parties should be resolving their differences through good-faith negotiations, without supply cutoffs," Gordon Johndroe said.

Talks between Gazprom and the Kiev gas company Naftogaz on the price of gas to be paid by Ukraine in 2009 and on fines Russia says it wants for £1bn in late payments broke down on Wednesday night and Russia turned off the taps early yesterday.

"We don't have any contract to supply gas for Ukraine's consumers at the moment, and thus we don't have any reasons to continue supplying gas," Sergei Kupriyanov, a spokesman for Gazprom, said.

While the latest dispute appears to threaten a replay of the 2006 crisis, which led to accusations that Moscow was using "energy blackmail" to punish its West-leaning neighbours, this time analysts say Russia's tough stance over the price of gas is more a reflection of its deteriorating economic situation as the global recession takes hold.

Ukraine says it can manage without Russian gas for several weeks through a combination of reserves and domestic gas production of 60 million cubic metres a day. Russia has been pumping 110 million cubic metres to Ukraine, plus 300 million cubic metres to European users through Ukraine's pipelines.

The price demanded by Russia of Ukraine was $250 per 1,000 cubic metres. Ukraine had argued that in the face of the declining oil prices, a fairer price would be $100 per 1,000 cubic metres. Western European consumers get Russia's gas for over $400 per 1,000 cubic metres.

Ukraine's 2008 debt for gas, which Moscow says is $2.1bn, remains another stumbling block in the talks.
Independent

Ukraine 'steals gas owned by EU' says Russia

By Dmitry Zhdannikov and Sabina Zawadzki


European countries began to suffer from reduced gas supplies yesterday after Russia cut deliveries to Ukraine in a contract dispute.

The Czech Presidency of the European Union said it would call a crisis meeting of envoys in Brussels on Monday and demanded that existing gas supply deals be honoured.

"We feel that the situation has now escalated to a point that substantiates an extraordinary meeting," Czech presidency spokesman Radek Honzak said. Talks would also probably be called soon with Moscow, another spokesman said.

"Energy relations between the EU and its neighbours should be based on reliability and predictability," the presidency said in a statement.

"Existing commitments to supply and transit have to be honoured under all circumstances."

Russia's gas export monopoly Gazprom accused Ukraine of stealing gas in transit. Gas importers in Romania, Hungary and Poland said pressure on their pipelines had dropped.

"Gas inflows from import fell by 30 to 40 percent ... This is because of Ukraine's dispute with Russia," Romania's state-controlled pipeline operator Transgaz director Ioan Rusu told Reuters by telephone.

There were similar reports of less steep supply falls from Budapest and Warsaw.

"Pressure started to decline at 1500 GMT. Pressure is declining continuously. However, the drop has not yet reached a critical level," Edina Lakatos, a spokeswoman for the Hungarian energy company MOL's natural gas transmission subsidiary, said.

Ukraine's state energy firm Naftogaz denied it was illegally siphoning off Russian gas.

Gazprom's accusation suggested Moscow was in no mood for compromise in a re-run of a 2006 argument that led to supply shortages across the EU.

"The Ukrainian side openly admits it is stealing gas and is not ashamed of this," Gazprom spokesman Sergei Kupriyanov said, adding that Gazprom had increased exports to Europe via an alternative route - Belarus.

Poland said deliveries from Ukraine had dropped six percent but were being made up by deliveries through Belarus.

"The change in deliveries is not being felt by Polish natural gas consumers," said gas operator Gaz System and gas monopoly PGNiG in a joint statement.
Independent

New cold war in Europe as Russia turns off gas supplies

By Daniel McLaughlin in Budapest and Vanessa Mock in Brussels
Independent

Putin approves EU deal to turn on gas

International monitors to check supply gauges in Ukraine pumping stations

By Denis Dyomkin in Moscow and Huw Jones in Brussels


Moscow has agreed to the deployment of international monitors to oversee the transit of Russian gas to EU countries via Ukraine, clearing the way for the resumption of European gas supplies, the Czech EU presidency announced last night.

Earlier, a senior Czech official said Russia's gas exporting monopoly, Gazprom, had baulked at a deal, insisting that Russian monitors be allowed inside Ukraine, which it claims is stealing gas piped to EU markets across its territory. The breakthrough came after talks between the Czech Prime Minister, Mirek Topolanek, and German and Russian leaders.

"This deployment should lead to the Russian supplies of gas to EU member states being restored," the EU said. There was no mention of any timeframe for deploying monitoring teams, nor did it say when supplies might be restored.

The talks were aimed at ending the row that has seen Russian gas supplies to Europe cut off, leaving hundreds of thousands of people in the Balkans without gas, forced factories to shut down and disrupted deliveries as far west as France and Germany – a situation the European Commission has described as completely unacceptable. Russia and Ukraine have yet to agree a price for Russian gas deliveries, which had been subsidised since Soviet times.

Earlier, Moscow said it would only restore gas supplies to Europe through Ukraine once international monitors were in place and told Kiev it must pay the going market rate for its energy. The Russian Prime Minister, Vladimir Putin, said a "collapse" of government and high-level corruption in Ukraine were partly to blame for the crisis.

"In order to restore normal flows, [Ukraine] needs to come to Moscow and sign a contract for gas supplies to Ukraine," Mr Putin said. "And they need to pay for the product they receive. At the market price ... our Ukrainian partners don't want to sign and don't want to pay. That's it."

The dispute between Kiev and its former Soviet master follows tensions over Ukraine's efforts to join Nato, a move bitterly opposed by Moscow and viewed with wariness even by European members of the alliance and by investors. For months, Ukraine has been beset by squabbling between President Viktor Yushchenko and his former ally, Prime Minister Yulia Tymoshenko, notably over ties with Russia.

Russia cut off gas for Ukraine's domestic consumption on 1 January in a row over pricing and debts, a dispute Mr Putin said was now damaging Russia's image. The EC President, Jose Manuel Barroso, urged a speedy end to the row, which has cut supplies to thousands of homes at the height of a bitter winter.
Independent