Saturday, November 22, 2008

Russia Threatens To Cut Off Gas To Ukraine

MOSCOW, Russia -- Russia's Gazprom will cut off gas deliveries to Ukraine on January 1 unless a new contract is signed, a company spokesman said on Saturday, making a threat that could affect deliveries to Europe.


"We would like to avoid such a scenario, we would like to agree on everything before New Year's, but as you understand, we cannot deliver gas without a contract," spokesman Sergei Kupriyanov told Vesti-24 television.

Negotiations between Russia and Ukraine are being held up by a large debt, he said. The comments came two days after Russian President Dmitry Medvedev demanded Kiev repay 2.4 billion dollars (1.9 billion euros) of debt to Gazprom.

Ukrainian state gas company Naftogaz has disputed the size of its bill to the Russian state-controlled gas giant.

Despite efforts by Gazprom to help Naftogaz obtain financing, "there has been no movement in this direction. This explains the toughness with which our intentions have been presented," said Kupriyanov.

An earlier dispute between Russia and Ukraine over gas prices led to a brief interruption of gas supplies in several European countries in January 2006. Most of the European Union's gas imports from Russia go through Ukraine.

Kupriyanov said the "full and unconditional liquidation of outstanding debts by Ukraine" was required under an agreement signed last month by Russian Prime Minister Vladimir Putin and his Ukrainian counterpart Yulia Tymoshenko.

"However, this has not happened so far," he added.

Kupriyanov also reiterated comments by Gazprom chief executive Alexei Miller that the price Ukraine pays for gas could increase to 400 dollars per 1,000 cubic metres from the current level of 179.5 dollars.

The spokesman hinted the price hike could happen in January: "This price was not stated just for its own sake. If we move to market relations not in 2011, but now, then precisely this price will be faced by Ukraine on January 1."

Under the agreement reached in October between Putin and Tymoshenko, the countries are to move to market prices for gas by 2011. Currently, Ukraine pays much less for Russian gas than EU countries.

Neither Gazprom nor Naftogaz could be reached for immediate comment Saturday.

Moscow's latest gas dispute with Kiev comes amid the global financial crisis, which has affected both countries but hit especially hard in Ukraine.

Earlier this month Ukraine became the first country to receive emergency assistance from the International Monetary Fund to help overcome the crisis, with a loan package worth 16.4 billion dollars (12.8 billion euros).

Following Medvedev's demand on Thursday, Naftogaz responded by saying it had no debt to Gazprom and that it owed around 1.26 billion dollars but only to gas trader RosUkrEnergo, an intermediary for Russia-Ukraine gas exchanges.

On Friday, Ukrainian President Viktor Yushchenko ordered his government to settle its debt to Russia, accusing Tymoshenko -- the president's political archrival -- of making no effort to pay up.

The government's mistakes could lead to "the colonisation of Ukraine," the president warned in a statement.

Source: AFP

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