Moscow-Kiev gas standoff alerts W-Eu | business | Hindustan Times
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Moscow-Kiev gas standoff alerts W-Eu

The standoff between Russia and Ukraine over gas supplies has ignited, sending a shiver running through western European countries.

business Updated: Jan 02, 2006 18:26 IST
PTI

The standoff between Russia and Ukraine over gas supplies has ignited, sending a shiver running through western European countries which may become innocent victims of the argument between Moscow and Kiev.

After weeks of talks, Russia's state-run natural gas monopoly Gazprom on Sunday halted deliveries to Ukraine and accused the country of stealing gas that goes through Ukraine on its way to Western Europe.

Gazprom supplies about one-quarter of the gas consumed in Europe. Most of that goes through pipes that cross Ukraine and the dispute has raised worries of widespread supply disruptions throughout much of the continent.

"There is information that Ukraine has begun siphoning off Russian gas that is designated for European users," Gazprom spokesman Sergei Kuprianov was quoted by Russian news agencies as saying Sunday evening, about eight hours after Gazprom announced it was stopping deliveries to Ukraine.

Ukrainian Prime Minister Yuriy Yekhanurov hotly denied the allegation, saying "today we are not using a single cubic meter of Russian gas."

In Washington, U.S. State Department spokesman Sean McCormack said in a statement that "such an abrupt stop creates insecurity in the energy sector in the region and raises serious questions about the use of energy to exert political pressure."

Supply problems to Europe could undermine Western trust in Russia's natural gas industry, one of the keystones of the country's economy, and tarnish Russia's stint as chairman of the Group of Eight, which formally started Sunday.

A Foreign Ministry statement said Russia would "strictly fulfill" its supply commitments to Europe and that "responsibility for any possible ... problems for European countries caused by the actions of Kiev will lie with Ukraine."

The supply restrictions were felt immediately. In Hungary, which takes Russian gas that has flowed through pipes in Ukraine, major power users were asked to switch to using oil as Russian gas supplies fell by 25 per cent. Austrian petroleum giant OMV said that natural gas imports from Russia via Ukraine were down nearly 20 per cent.

The only gas being put into pipelines headed for Ukraine is intended for European customers, according to Gazprom. Gazprom has demanded that Ukraine more than quadruple the price it pays for Russian gas, which accounts for about a third of the gas used in the country of 48 million. It argues that its new price of $230 per 1,000 cubic meters is in line with world market prices; it paid $50 last year.

Ukrainian officials say such a huge leap would cripple the country's economy, which relies strongly on energy-intensive heavy industries. Ukraine has not objected to abandoning the cheap price it had been paying, but wants the increase phased in gradually. Ukrainian President Viktor Yushchenko on Sunday denounced Russia for imposing "obvious economic pressure on Ukraine." Relations between Russia and Ukraine have been stiff and chilly over the past year, since Yushchenko came to power and vowed to move the country out of Russia's sphere of influence.

On Sunday, a spokesman for Ukraine's gas company Naftogaz sought to reassure the population that Ukraine has enough gas in reserve. "For the people and municipal services there will be enough gas," Eduard Zaniuk said.

EU Energy Commissioner Andris Piebalgs said last week Europe could cope with a temporary interruption to its gas supply. EU energy experts will meet Wednesday to examine the situation. __

AP reporters Aleksandar Vasovic and Anna Melnichuk contributed to this story from Kiev.