Europe feels pinch as Russia-Ukraine gas crisis deepens
Published: 1/2/2006
MOSCOW - Europe started to feel the pinch Monday after Russia cut natural gas supplies to Ukraine in a politically-charged price dispute, while Moscow accused Kiev of stealing some of the exports meant to cover a fifth of the European market.

European countries, including France, Germany and Poland, reported heavy supply reductions a day after Moscow turned off the taps to Ukraine because of Kiev`s refusal to accept a steep increase in the price of Russian gas imports.

"The volume of gas stolen by Ukraine from the pipeline to Europe on January 1 was close to 100 million cubic metres, valued at 25 million dollars at the market price," Alexander Medvedev, deputy chairman of Russian energy giant Gazprom and head of exports, said at a news conference in Moscow.

Medvedev announced Gazprom would carry out checks on gas volumes and "use all possible measures so that Western consumers continue to receive gas as foreseen by contracts."

European Union economic heavyweights France and Germany announced cuts in their Russian natural gas supplies of up to 30 percent. Austria, Hungary, Italy, Poland, Slovakia and Croatia were also hit, raising fears of heating problems in the middle of winter.

There was also a knock-on effect, with Hungary forced to slash its gas supplies to Serbia-Montenegro and Bosnia.

Ukraine`s President Viktor Yushchenko met with ambassadors from the European Union, Japan and the United States on Monday to discuss the gas crisis and said Kiev would call for international experts and arbitration in the price dispute.

The European Union`s foreign policy chief Javier Solana was in contact with Kiev and Moscow to urge a resumption of negotiations between the two sides, a spokeswoman said Monday ahead of a special meeting of EU energy officials on Wednesday to discuss supplies.

Ukrainian Energy Minister Ivan Plachkov denied Ukraine was siphoning off Russian gas to make up for its energy needs but warned Kiev would be forced to do so if temperatures plunged below freezing.

Ukrainian officials earlier said Kiev had the right to 15 percent of Russian gas transiting through Ukraine bound for European markets as payment for handling the gas.

Ukraine`s 48 million people braced for shortages, which would affect the country`s heavy industry and central heating in homes, while Kiev accused Moscow of seeking to destabilise Ukraine`s economy, which depends on Russia for around a third of its natural gas import needs.

Officials sought to dampen alarm among ordinary Ukrainians, however, saying natural gas needs were currently being met by domestic production and reserves, as well as supplies from Turkmenistan secured under a separate agreement.

But Gazprom said it was holding back all exports from the Central Asian state, which have to travel through Russian pipelines.

Reflecting mounting concern in Western capitals, the United States warned that the dispute had created "insecurity" in Europe`s energy sector and criticised Moscow for its "sudden" move to cut supplies to Ukraine.

"Such an abrupt step creates insecurity in the energy sector in the region and raises serious questions about the use of energy to exert political pressure," State Department spokesman Sean McCormack said in a statement.

The crisis has raised questions among Western officials and analysts about Europe`s dependence on Russian imports and Moscow`s policies as the country takes the helm of the G8 group of industrialised nations in 2006 for a presidency focussed on energy security.

Around 20 percent of European gas imports come from Russia via Ukraine along a single trunk pipeline that splits off after entering Ukraine into smaller branches to supply the Ukrainian network and western Europe.

Russian analysts believe the row may end up helping Ukraine`s pro-Western president in key parliamentary elections in March, where he faces a serious challenge from Russia-backed candidate Viktor Yanukovich.

Kiev has so far been paying 50 dollars per 1,000 cubic metres (35,316 cubic feet) of natural gas from Russia and says it can pay more only over a transitional period.

Gazprom, which controls a third of the world`s natural gas reserves, wants 230 dollars (195 euros) for the gas immediately, arguing that Soviet-era tariffs no longer apply and the price needs to be aligned with market rates.

http://www.turkishpress.com/news.asp?id=97262