Fears As Russia Cuts Gas To Ukraine In Mid-Winter

MOSCOW, Russia -- Moscow's refusal to open gas pipelines to Ukraine has sparked international fears for the "humanitarian implications in winter" and heightened concerns over Europe's dependence on Russian-controlled energy.

White House spokesman Gordon Johndroe.

After Russia cut supplies and sharply raised rates in a contract dispute, the two uneasy neighbours were at great pains yesterday to make sure that their row would not leave Europe short of gas just as winter set in.

Russia's gas monopoly, Gazprom, shut off supplies on Thursday night after talks broke down over Ukraine's payments for past shipments and a new price contract for this year.

The US ambassador to the EU, Kristen Silverberg, warned the dispute could have "humanitarian implications this winter".

The EU's Czech presidency and the European Commission said in a joint statement they were "concerned" by the cut-off.

White House spokesman Gordon Johndroe urged both sides to keep in mind the human toll of any interruption of gas supply in the winter.

"The predictable flow of energy to Ukraine and the rest of Europe under market-based, transparent conditions is essential for stability and reliability in regional and global energy markets," Mr Johndroe said.

When Kiev turned down far lower proposed terms, Gazprom warned it would have to pay nearly double the amount Ukraine was angling for this year -- shortly after Ukraine's President said the two sides were close to a compromise.

"In connection with the rejection by Ukraine of the reduced conditions for the delivery of gas at $US250 (per 1000 cubic metres), Gazprom will release the delivery of gas to Ukraine from January at the European market rate of $US418 per 1000 cubic metres," Gazprom chief executive Alexei Miller said, according to state news channel Vesti 24.

Gazprom confirmed that supplies to Ukraine were shut off at 10am, Thursday, local time.

"We have reduced the supply of gas to Ukraine by 100 per cent," said Gazprom spokesman Sergei Kupriyanov.

Ukraine's gas company, Naftogaz, confirmed that the volume of gas it was receiving from Russia had dropped, but promised that transit of supplies meant for customers downstream in Europe would be guaranteed.

Overshadowing their confrontation were memories of 2006, when a similar dispute interrupted gas shipments to many European countries for three days. But Russia and Ukraine now have strong interests in proving to Europe they can be reliable energy partners, and they assured other European nations they would not be affected.

In a change from the tough rhetoric that has marked the sides' latest verbal exchanges, Ukrainian President Viktor Yushchenko said Russia and Ukraine were "close to a compromise" and negotiations should be concluded by Wednesday.

Ukraine's Foreign Ministry would send a delegation to European capitals to discuss the problem, said ministry spokesman Vassili Kirilich, Interfax-Ukraine reported.

About a quarter of the gas used in the European Union -- more than 40 per cent of the gas imported by the bloc -- comes from Russia, 80 per cent of it moving in pipelines that pass through Ukraine.

"Investors, and gas consumers in Europe, will be hoping that cooler heads prevail before the lights go out across Europe," said Chris Weafer, chief strategist at UralSib.

Source: The Australian