Russia Cuts Off Gas Supply to Ukraine, Europe at Risk

Russia cut gas supplies to Ukraine on Sunday in a dispute that could hit deliveries to a wintry Europe just as Moscow took over as chairman of the Group of Eight wanting to showcase its role as a reliable energy source.

Russian state monopoly Gazprom said it had cut supplies of gas to Ukraine by a quarter -- Ukraine's own daily imports -- after Kiev refused to sign a new contract under which it would have to pay four times as much for the fuel.

All the gas now being pumped to Ukraine is meant to be shipped on to Europe, which gets 25 percent of its gas from Russia.

Gazprom said gas deliveries to western Europe would not be disrupted, unless Ukraine covered its own shortfall by siphoning off transit supplies being piped westward across its territory.

But Ukraine's Naftogaz energy company accused Russia of playing a dangerous game of brinkmanship which put Europe's gas supplies in jeopardy.

"Gazprom ... has cut supplies via a number of directions from which gas transit to Europe is carried out," Naftogaz said.

"The volumes of gas aimed at securing transit to Europe have been reduced ... Naftogaz declares such actions unacceptable because they endanger gas deliveries to Europe."


Though Russia says it is purely a business dispute, the gas cut-off has fed concern from Washington to Berlin that the Kremlin is prepared to use its control over massive energy resources as a political weapon.

Ukraine's Western-leaning president, Viktor Yushchenko, has irked Moscow by trying to take his ex-Soviet state on Russia's western border into NATO and the European Union.

That, say Ukrainian officials, is why the Kremlin is punishing Ukraine with such a huge price increase while letting more Moscow-friendly ex-Soviet states such as Belarus go on paying far less for Russian gas.

Moscow took over the annual chairmanship of the G8 club of industrialised nations for the first time from Britain on New Year's Day, and its tenure is certain to come under intense international scrutiny.

"Russia wants to make energy security its key message to the G8 community, and simultaneously it is becoming a source of danger," said Valery Nesterov, energy analyst at Troika Dialog brokerage in Moscow.


Gazprom spokesman Sergei Kupriyanov said exports to Ukraine had been cut by 120 million cubic metres a day -- equivalent to Ukraine's total daily imports.

He said 360 million cubic metres a day were being shipped as normal via Ukraine to other countries, and if supplies to western Europe were disrupted, Ukraine would be to blame.

"The Ukrainian authorities were determined to have a conflict from the start, and from January 1 to ... start stealing gas from European consumers," Kupriyanov said.

Eighty percent of Russian gas exports to western Europe pass through Ukraine.

The Ukraine Naftogaz statement, contradicting Gazprom's figures, said the volume of gas reaching Ukraine from Russia had been cut by 187 million cubic metres a day.

Russia's NTV television -- owned by Gazprom -- quoted Alexander Nemudrov, a Gazprom official at a pumping station in Slovakia, as saying gas flow out of Ukraine was already falling.

That suggested Ukraine was making up for its shortfall by drawing gas intended for other countries. Gazprom officials in Moscow said they would not know definitely if that was the case until later on Sunday.

The biggest European importers of Russian gas are Germany, Italy and France, which would have to draw down reserves of gas stored underground or seek alternative supplies if there was a major supply disruption.

Moscow is seeking a rise in the price of gas it sells to Ukraine to $230 (134 pounds) per 1,000 cubic metres from the current $50 -- a level that reflects Soviet-era subsidised rates. Ukraine agrees in principle but wants a transitional period.

Yushchenko, propelled to power in the "Orange Revolution" a year ago, has linked the gas switch-off to the start of campaigning for a parliamentary election on March 26 in which he faces a tough challenge from pro-Moscow parties.

Additional reporting by Anatoly Titkin and Dmitry Zhdannikov in Moscow and Olena Horodetska in Kiev.

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Last updated 04/01/2006

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