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Russia cuts off gas to Ukraine

Russia cut off gas supplies to its neighbour Ukraine after failing to agree a new contract, sparking renewed concern over Europe's dependence on Russian-controlled energy resources.

world Updated: Jan 01, 2009 19:20 IST

Russia on Thursday cut off gas supplies to its neighbour Ukraine after failing to agree a new contract, sparking renewed concern over Europe's dependence on Russian-controlled energy resources.

Major European consumers of Russian gas -- most of which transits across Ukraine -- reported no immediate impact on their supplies but the European Union expressed concern that the dispute had flared up yet again.

Russia's state-run gas giant Gazprom confirmed that supplies to Ukraine were shut off at precisely 10:00 am (0700 GMT) after the parties failed to agree terms for a 2009 contract to replace the old one which expired at midnight.

"We have reduced the supply of gas to Ukraine by 100 per cent," Gazprom spokesman Sergei Kupriyanov said.

Ukraine's gas company, Naftogaz, separately confirmed that the volume of gas it was receiving from Russia had dropped, but promised that transit of supplies meant for customers downstream in Europe would be guaranteed.

Gazprom's move recalled a similar cut-off in January 2006 that affected gas supplies to Europe. This time, Ukraine and the EU say they have enough gas reserves to see them through the winter.

A Gazprom official said the flow of more than 300 million cubic metres per day of gas that transits Ukraine destined for clients further afield in Europe was continuing unabated.

Around one-fourth of the gas used in the European Union -- more than 40 per cent of the gas imported by the bloc -- comes from Russia, 80 per cent of it moving in pipelines that pass through Ukraine.

The European Union's Czech presidency and the European Commission said in a joint statement that they were "concerned" by the turn of events.

"The Presidency and the Commission urge both sides and their governments to continue negotiations and rapidly reach a successful outcome so that gas supplies to the EU are not affected," the statement said.

But Italy and Poland, two big consumers, said on Thursday they had no immediate problem with their Russian gas deliveries. Germany said precautions had already been taken to ensure supplies were not disrupted.

Gazprom's Kupriyanov called for further negotiations while Ukraine's energy representative Bogdan Sokolovsky said Kiev was ready to resume the talks at any time.

The supply cut-offfees totalling $450 million.

The two countries also failed to reach agreement by the midnight on Wednesday deadline on a new contract for 2009 delivery.

The Russian gas giant in turn accused Ukraine of threatening to steal gas meant for other European customers and Prime Minister Vladimir Putin warned Wednesday that Kiev would face "severe consequences" if it did so.

This marked the second time in three years that Gazprom has cut supply to Ukraine and comes with the country struggling under a public row within its leadership and major economic problems.

Putin on Wednesday poured scorn on Ukraine's leaders, who he said were involved in "inter-clan fighting" at a time when Ukraine was in a "pre-default" situation.

Gazprom's chairman Alexei Miller put the blame for the crisis squarely on Ukraine, where he said there were "political forces who are very interested in there being a gas conflict between the two countries."

In addition to the commercial dimension, Putin and Russian President Dmitry Medvedev have fiercely criticised Ukrainian President Viktor Yushchenko for what they say are his US-dictated policies.

Russian political analysts say their anger with Yushchenko, fueled most recently by reports that Ukraine aided Georgia in its brief war with Russia last August, has played a central role in the latest energy crisis.

Russia and Ukraine were united in the Soviet Union until its Soviet collapse in 1991. The subsequent pro-Russian leadership in Ukraine was ousted by the "Orange Revolution" of 2004 that swept Yushchenko to power.

Russia has said that as an independent state, Ukraine will have to pay market rates for gas and Putin has asserted that if the West wants Russia to continue selling at Soviet-style subsidized rates in order to get an accord with Kiev, then it should pay the difference.

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