No end to Russia-Ukraine gas row

Russia and Ukraine are in real crisis, according to Vladimir Putin, with negotiations to resolve a gas price dispute going to the wire before a 1 January deadline for Ukraine to accept a steep increase or see supplies cut off.

    Yushchenko says Gazprom's asking gas rate is provocative

    "You have simply created a real crisis and not only in the energy sector," Putin said on state television on Thursday in a rebuke to negotiators from both sides.

    "This crisis looks like a crisis between two countries. That is very bad."

    Russian state-controlled behemoth Gazprom has announced a more than four-fold increase in natural gas prices to neighbouring Ukraine. It says that if Kiev does not agree by Sunday the supply will be shut down - a scenario that could disrupt the huge shipments through Ukraine to western Europe.

    Russia's state-run gas giant Gazprom says the dispute is strictly commercial. However, some ex-Soviet republics that have toed a more pro-Kremlin line continue to enjoy significant discounts.

    For example, Belarus has secured a deal to pay just $46.68 per 1000 cubic metres next year, President Alexander Lukashenko said on Thursday.

    No breakthrough

    Viktor Khristenko, Russia's energy minister, was quoted by news agency RIA-Novosti as saying there had been no breakthrough in the talks, held at one of Putin's residences outside Moscow.

    However, negotiations were continuing, Russian media said late Thursday.

    Putin chided negotiators for not
    being able to break the deadlock 

    Ukraine currently pays $50 per 1000 cubic metres of gas. Gazprom wants the price to be $220-230, which is close to world market levels.

    The head of Ukraine's state-owned Neftegaz, Alexei Ivchenko, indicated a possible compromise in telling Putin that he wanted a transition period of lower prices up to 1 April, when they would be able to "switch to the classic form of market relations".

    However, it was not clear whether he meant that Gazprom's full price would be accepted from 1 April. Ivan Plachkov, the Ukrainian energy minister, also speaking on Russian television, offered a price of just $80 during the transition period.

    Provocative demand

    Earlier in Kiev, Viktor Yushchenko, the Ukrainian president, ruled out accepting Gazprom's "provocative" demand of $220-230, but added that the row "will be resolved very shortly".

    Putin said one way out would be for Russia to offer Ukraine a $3.6 billion loan to cover the cost of changing to new prices.

    "We are ready to extend a commercial credit directly to your company Neftegaz under guarantee from one of the first-class international banks," Putin was quoted as saying by news agency Interfax.

    One-fifth of Russian gas supplies
    to West Europe goes via Ukraine

    But AFP reported on Thursday that Yushchenko had rejected the loan offer.

    Western Europe is closely following the row as nearly one-fifth of its gas imports come from Russia via Ukraine. Kiev has said it has a contractual right to 15% of Russian gas shipped through its territory.

    In Brussels, the European Commission said it would not intervene, but was hoping for a last-minute resolution.

    "We expect that the difficulties that are appearing now can be resolved in the coming hours before the deadline," Amadeu Altafaj Tardio, a commission spokesman, said.

    Dietmar Stuedemann, Germany's ambassador to Kiev, said that Ukraine should be allowed "a gradual path to market prices".

    "Ultimatums are inacceptable," he was quoted as saying by the daily business newspaper Delo.



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