Russia's Gazprom cuts all gas to Ukraine

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Russia's Gazprom cuts all gas to Ukraine



By LYNN BERRY, Associated Press Writer Lynn Berry, Associated Press Writer – 49 mins ago



MOSCOW – Russian gas monopoly Gazprom said it cut all gas supplies to Ukraine on Thursday morning after talks broke down over payments for past shipments and a price for 2009.

Gazprom spokesman Igor Volobuyev said the cuts began as planned at 10 a.m. (0700GMT and 2 a.m. EST) Thursday.

A spokesman for Ukrainian gas company Naftogaz confirmed a steady drop in supplies.

There are fears that a cutoff could lead to a repetition of a January 2006 gas crisis. Then, a similar dispute between Russia and Ukraine briefly interrupted gas shipments to many European countries. Ukraine controls the pipelines through which Russia supplies most of its customers in Europe.

While cutting gas to Ukraine, Gazprom said it also has increased the gas pumped through pipelines that mainly serve Europe, which gets about a quarter of its gas from Russia.

Russian Prime Minister Vladimir Putin has warned Ukraine against diverting gas intended for other customers, saying that could have "quite serious consequences for the transit country itself" by damaging relations with Europe.

Ukraine's president and prime minister issued a statement saying they would guarantee the uninterrupted transit of natural gas through Ukrainian territory to Europe.

Natural gas is used for heating and to generate electricity, and the cutoff comes as Europe approaches the depths of winter. Naftogaz director Oleh Dubina has said that Ukraine has enough gas in reserve to last it through early April.

The deadlock over gas supplies reflects the deep political split between Moscow and Kiev.

Ukrainian President Viktor Yushchenko has angered the Kremlin through his efforts to build ties to Western Europe and his support of Georgia in its August war with Russia.

Ukraine's position in the dispute is further complicated by divisions in the country's leadership. Yushchenko and Prime Minister Yulia Tymoshenko, bitter political rivals, are at odds over gas policy and relations with Russia, among other issues.

Gazprom had warned it would cut gas supplies unless Ukraine paid off all of a $2.1 billion debt and signed a deal setting prices for 2009 deliveries by midnight. Neither was done.

Naftogaz paid $1.5 billion to the Swiss-based gas trader Rosukrenergo, which it says covers the debt. But Gazprom CEO Alexei Miller said late Wednesday that Gazprom had not yet received the money. Gazprom claims Ukraine owes $600 million more in fines for late payment.

Rosukrenergo is half owned by Gazprom. It was not immediately clear why the money had not been transferred to Gazprom.

"This is an issue of Gazprom's dealings with Rosukrenergo," Naftogaz spokesman Valentyn Zemlyansky said. "Naftogaz has fulfilled all its obligations."

The other stumbling block was the failure to sign a contract for 2009 gas deliveries.

Gazprom had first insisted that Ukraine pay $418 per 1,000 cubic meters of gas in 2009, more than double the $179.5 it paid the previous year.

On Wednesday, Gazprom offered a contract with gas set at $250, which Ukrainian officials said was still too high.

Yushchenko and Tymoshenko offered early Thursday to pay Russia $201 per 1,000 cubic meters of gas if Russia agrees to pay $2 per 1,000 cubic meters per 100 kilometers in future transit fees for use of Ukraine's pipeline network.

Russia has said the $250 offer is contingent on the current transit fee of $1.70 remaining unchanged.

While Gazprom's European customers now pay more than $400, the cost of gas is expected to fall sharply in the spring as a result of the steep drop in the price of oil.

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Associated Press writer Maria Danilova contributed to this report from Kiev, Ukraine.

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update "Ukraine refuses to ship Russian gas to Europe"

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Quote:Deliveries of Russian gas destined for Europe will not resume on Wednesday as hoped, according to the head of Ukraine's gas company, who blamed conditions set by Russia for the delay.

The news came as leaders from several European nations affected by the supply choke travelled to both countries to ask them to settle the issue. The European Union has warned of legal consequences for Russia and Ukraine for halting gas flows in mid-winter.

Russian gas company Gazprom turned on one natural gas tap to Ukraine, which carries most of the Russian gas destined for Europe in pipelines running through its territory, on Tuesday.

Ukrainian gas company Naftogaz did not deliver the gas to Europe, however, saying Gazprom had insisted it use a route that was technically arduous and would cut supplies to Ukrainian customers.

Naftogaz chief Oleh Dubina said Gazprom repeated its request again Wednesday, but that the Ukrainian gas company is refusing to block the flow to its own consumers.

Russia has selected a single gas entry point at its border and ordered the gas be transported to a pumping station near the Romania border, Ukrainian energy adviser Bohdan Sokolovsky said Tuesday, calling it a "technically impossible transit route."

The two points are not linked by an export pipeline and would require Ukraine to cut service to domestic consumers in its eastern industrial region before it can deliver gas to the Balkans, according to Sokolovsky.
Price dispute deadlock

Russia has not agreed to send natural gas to Ukraine for domestic consumption. The countries are deadlocked over the price for gas Ukraine will pay and the amount Russia should pay for transporting gas through the country.

Russia's gas cut-off has left large parts of Europe in the cold and dark in the mid-winter. Eleven people have reportedly frozen to death during the dispute.

Russian Prime Minister Vladimir Putin on Wednesday accused Ukraine of holding European nations hostage and insisted the EU should not accept Ukraine's claims.

"No matter what papers others provide, I'll burn them in the oven," he told the visitors, referring to Ukrainian documents sent to the European Union. "We opened the tap, and are ready to supply gas, but on the other side, the tap is closed."

Putin made the comments as he met with the prime ministers of Slovakia, Bulgaria and Moldova at his residence outside Moscow.

Slovakian Prime Minister Robert Fico said "Ukraine is losing the trust of European partners because of its behaviour."

"The most unpleasant part is that millions of Europeans feel like hostages and are truly suffering," said Bulgaria's Sergei Stanishev.

Ukrainian President Viktor Yushchenko travelled Wednesday to Poland for talks on the dispute.

Moscow alleges that Ukraine illegally siphoned off supplies meant for other European countries between Jan. 1 and Jan. 7 — a charge Kiev denies.

A deal signed Monday to restart the gas flow requires a EU-led monitoring mission at the metering and compressor stations across Ukraine.

The monitoring agreement is meant to allow European, Russian and Ukrainian experts to measure the flow of Russian gas through Ukrainian pipelines.

Jose Manuel Barroso, the European Commission's president, warned Gazprom and Naftogaz that he would advise European energy companies to sue them unless they make genuine efforts to restore gas supplies.

"If the agreement is not honoured, it means that Russia and Ukraine can no longer be considered reliable partners for the European Union in matters of energy supply," Barroso told the European Parliament.
Tens of thousands without heat

European Union officials said that when pumping resumes, it will take at least a day for gas to reach consumers in Europe, tens of thousands of whom have been left without heat as a result of the dispute.

Gazprom supplies one-quarter of all natural gas consumed by EU countries, and 80 per cent of that gas is piped through Ukraine.

Serbia's power grid was on the verge of an overload Wednesday as thousands switched to electric heat and residents were urged to conserve energy. Air pollution in Belgrade was also reportedly on the rise because of the shift from natural gas to oil.

Hungary issued its first-ever smog alert in Budapest last week for the same reason.
With files from the Associated Press