Jan 2, 2009

World - Russia cuts off gas supply to Ukraine

Vladimir Radyuhin

MOSCOW: Russia has cut natural gas supplies to neighbouring Ukraine on Thursday after talks on gas prices for 2009 fell through.Russia’s gas monopoly Gazprom said it had halted deliveries to Ukraine following the expiry of the 2008 contract.

Europe voiced concern over the row as 80 per cent of Russian gas supplies to Europe go through Ukraine. Gazprom meets a quarter of Europe’s gas needs. In a letter to Gazprom on December 31, Ukraine’s state gas company said it could not guarantee uninterrupted transit of Russian gas to Europe if Russia cut off supplies to Ukraine.

The last time Gazprom cut off supplies to Ukraine in a similar dispute over prices in 2006 Ukraine just siphoned off transit gas for its own needs. Moscow had warned for weeks that talks on a 2009 contract could not begin till Kiev paid back a $2-billion-odd debt for the gas already supplied to Ukraine.

It was only on the last day of 2008 that Ukraine transferred $1.5 billion, leaving less than a day for the two sides to negotiate a deal. Gazprom said it had proposed to Ukraine a generous price of $250 per 1,000 cubic metres of gas in 2009, given that the price in Europe was currently more than $500.

Ukraine rejected the price, and its delegation broke off talks and left Moscow hours before the New Year. Gazprom said the delegation anyway had no mandate to sign a deal. Ukraine’s President and Prime Minister issued a joint statement on January 1, stating that the price for Russian gas for Ukraine should be fixed at $201 per 1,000 cubic metres, and called on the European Commission to join talks with Russia.

There is a strong impression in Moscow that Ukraine deliberately provoked a showdown with Russia over gas supplies to win the West’s support and give fresh fire powder to Russia’s critics in Europe and the U.S., who accuse Moscow of using its energy resources as a political weapon against its pro-Western neighbours.

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