Russia starts Ukraine gas cut

Russia's natural gas monopoly Gazprom has halted sales to Ukraine in a price dispute and begun reducing pressure in transmission lines that carry substantial gas supplies to Western Europe.

    Gazprom said sales would be cut on Sunday (TV frame grab)

    OAO Gazprom had demanded that Ukraine this year more than quadruple the amount it pays for Russian gas, which accounts for about one-third of the consumption in the country of 48 million people.

    Gazprom had said its official sales cutoff to Ukraine will be 10am (0700 GMT) on Sunday. However, before that deadline, company spokesman Sergei Kuprianov said pressure in the pipelines was being reduced.

    "Export gas for Europe is moving at full volume," Kuprianov said in comments shown on Russian television.

    Gazprom provides about half the gas consumed in the European Union, and about 80% of that amount is sent in pipelines that cross Ukraine. The price dispute has raised concerns that European supplies could be affected.


    Ukrainian officials have said the country has enough gas reserves to weather a Gazprom cutoff for several weeks, but have declined to specify how much is in reserve.

    Kuprianov said Ukraine would suffer quick and severe effects.

    Ukraine's refusal "to meet our proposals for resolving the problems will have catastrophic consequences for the economy of Ukraine and, unfortunately, for the brotherly Ukrainian people," he said, according to the news agency Interfax.

    President Vladimir Putin said
    Ukraine was offered a deal (file)

    "We consider that it will be extremely difficult, even impossible, for the Ukrainian authorities to explain to their people the cause of such shortsighted policy," he was quoted as saying.

    On Sunday, Vladimir Putin, the Russian president, said Ukraine could continue paying the old, lower price of $50 per 1000 cubic meters for the first quarter of 2006 if Ukraine agreed by the end of the day to start paying the new price of $230 in the second quarter of the year.

    Kuprianov said Ukraine formally refused the offer. But Dmytro Marunich, a spokesman for Ukraine's state-run Naftogaz, said "an agreement was reached yesterday that we will work until April with existing prices and after that date we will switch to European prices which remained to be discussed".

    World prices

    Gazprom has said the price increase is necessary to conform to world gas price levels. Ukraine has not objected to adjusting the market conditions but wants an increase to be phased in.

    Viktor Yushchenko, Ukraine's president, has said late on Friday that the most it is willing to pay now is $80.

    Interfax on Sunday quoted Ivan Plachkov, Ukraine's fuel and energy minister, as saying that Ukraine and Russia "will sign an appropriate set of documents during the first four months of 2006".

    "That will be followed with final agreements on price formulas and fees for the transit of Russian gas through Ukraine," he was quoted as saying. "There will be gas."

    The showdown has underlined the tension between the historically linked, mostly Slavic ex-Soviet republics since the West-leaning Yushchenko, who wants to reduce Moscow's clout in his country, beat his Russian-backed rival in a bitter electoral battle a year ago.

    SOURCE: Agencies


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