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Russia cuts off all natural gas supplies to Ukraine

Vladimir Radyuhin

Kiev rejects Moscow's eleventh hour offer of compromise on price

MOSCOW: Russia has cut off all natural gas supplies to Ukraine on the New Year Day after Kiev rejected Moscow's 11th hour offer of compromise in a bitter dispute over gas prices.

Russia's state-controlled natural gas monopoly, Gazprom, shut off gas sales to Ukraine at 10:00 local time (07:00 GMT) on January 1, hours after Ukraine turned down President Vladimir Putin's offer not to raise gas prices till April provided Ukraine agreed to a steep hike in gas prices after that.

Gazprom is demanding that Ukraine pay $230 per 1,000 cubic metres of gas, a nearly fivefold increase from the price of $50. Ukraine's President Viktor Yushchenko said the most he was willing to pay now is $80.

The Ukrainian leader also rejected another offer from Mr. Putin last week to loan Ukraine $3.6 billion to cushion the shock of higher gas prices, saying his country doesn't accept "alms."

Russian gas covers just over 30 per cent of Ukraine's gas needs. Another 50 per cent Ukraine buys from Turkmenistan, with the balance made up by Ukraine's own gas extraction. Gazprom said it had stopped deliveries of both Russian and Turkmenian gas to Ukraine. Last week Gazprom signed a contract to buy additional quantities of Turkmenian export gas to step up pressure on Ukraine. Russia depends on the Ukrainian pipeline system for the transit of 80 per cent of its gas exports — 116 billion cubic metres this year — to Europe. Therefore Gazprom cannot just turn off the gas tap for Ukraine. On Sunday it merely lowed the pressure of gas entering Ukraine's pipelines.

Meanwhile, Ukrainian leaders said they would continue taking Russian gas from Europe-bound pipelines because they thought Gazprom's move was unfair.

Siphoning off

Russia warned Ukraine to refrain from siphoning off European gas. "If this does not happen, all responsibility for a possible aggravation of Russian-Ukrainian relations in the gas sphere and for problems Kiev's actions will create for European countries will devolve on the Ukrainian side," said the Russian Foreign Ministry said in a statement on Sunday.

The statement accused Kiev of deliberately torpedoing the gas price talks to whip up anti-Russian feelings and postpone a crucial parliamentary election in March. Opinion surveys predict a defeat to President Yushchenko's party in the poll.

Reflecting the European Union's concern over possible disruption of Russian gas supplies, the E.U. Executive Commission has called an emergency meeting of its gas coordination group on January 4 to discuss the issue.

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