Ukraine-Russia Gas Deal Faces New Threat

BRUSSELS, Belgium -- The European Commission is playing down the risk of further gas supply problems to the EU, despite a new twist in the row over prices in Ukraine and an ongoing cold snap in Russia.

Some elements in the commission are more relaxed than member states over gas dependency

"The commission expects that Russia will fulfill its commitments as a gas supplier and that Ukraine will stick to its commitments as a transit country," energy spokesman Ferran Tarradellas Espuny indicated on Friday.

His remark followed a Ukraine parliamentary resolution tabled on Wednesday by Yulia Tymoshenko's opposition bloc to dissolve the 4 January price deal between Ukrainian distributor Naftogaz and Russian monopoly Gazprom.

The resolution also calls for the sacking of the Ukrainian energy minister and the CEO of Naftogaz.

The January price row saw Russian deliveries to Europe drop by up to 40 percent, with the price deal up for renegotiation by July in any case.

Meanwhile, freezing conditions in Russia continue to claim lives and to strain Gazprom's resources with supplies to Austria, Finland, Hungary, Slovakia and the Czech republic down by some 20 percent this week.

Long term supplies safe

The recent developments have caused a watershed in thinking on Russian energy dependency in some central European member states, especially Hungary and Poland.

But some people in the commission believe neither Russia nor Ukraine would block EU gas again, for fear of causing further damage to their commercial reputations as well as losing income.

Brussels is also treating the cold-related gas shortages as "normal seasonal variations," saying member states' energy grids have back-up plans in the event of swings in weather conditions.

Europe can afford to be "sanguine" about its long term energy relations with both Moscow and Kiev, insiders say, barring a major collapse in political relations between the trio of countries.

Russia-Ukraine price disputes have occured at this time of year for at least three years and are known as the "rites of Spring" in commission circles.

Political dimension

But many analysts see a new political dimension in the current Russian-Ukrainian price dispute, with Ukraine foreign minister Boris Tarsyuk recently hinting the row is aimed at damaging the post-Orange Revolution regime in the run up to 26 March elections.

Ukraine is currently in the midst of a constitutional battle between president Viktor Yushchenko and parliament, which sacked his government over the gas price deal last week.

On top of this, Paris based journal Ukraine Intelligence wrote on Thursday that president Yushchenko's brother, Piotr Yushchenko, stands to make millions from dodgy deals surrounding Rosukrenergo, the Swiss-based firm involved in January's Gazprom-Naftogaz agreement.

"We want to know if this is true, or if it is just an attempt to destabilise the political situation before the elections," Ukrainian MP Ihor Szurma said, Polish daily Rzeczpospolita writes.

Russia and Ukraine are also embroiled in a dispute over whose officials have the right to occupy lighthouses in the Crimean peninsula - a semi-autonomous chunk of Ukraine home to Russian naval bases.

Source: EU Observer