Russia and EU moving closer on Ukraine gas transit issues

Russia has been warning of the possibility of a yet another gas crisis as Ukraine is again facing problems with gas payments, and is calling on Europe to give it a hand and jointly lend the to the transit country.

Another spin in the Russia-Ukraine gas chronicle is centered this time on unpumped gas. Russia and Ukraine failed to agree on how Kiev would pay $5 billion for the gas it need to store for the winter and thus ensure smooth transit to Europe. Prime Minister Putin says the issued needs to be addressed.

“Without the gas from the underground storage facilities Ukraine economy cannot function. The gas must be pumped now, because technologically it will be impossible to pump it in the sufficient volumes later.”

Russia supplies a quarter of Europe’s gas with 80% of it flowing through Ukraine.
Gazprom pays for the transit and has already paid Ukraine in advance for the whole of 2009. Gazprom spokesman Sergey Kuprianov believes Ukraine will have problems coming up with the money and that Gapzrom may need to look at a different pricing mechanism

“The financial situation at Naftogas is very difficult. Naftogas may face serious problems with paying for gas supplies in May. During the meeting Gazprom pointed out the need to fill Ukraine's gas storage facilities for the winter period. We also reminded our partners that if Naftogas doesn't pay on time, we'd have to switch to charging 100% in advance.”

Gazprom says it’s still possible to avoid the crisis, but for that Russia and Europe have to invest together. Moscow is ready to do its part while Europe remains reluctant to lend the transit country, according to Energy Minister Sergey Shmatko.

“The EU has no adequate estimation of the problems that may occur with the stability of gas supplies in the coming winter. We are concerned that Ukraine won’t keep to the schedule of filling its gas storages. This may result in serious problems with gas supplies to Europe next winter. Besides, we hear more often President Yushenko’s calls to review the current gas contracts.”

So far the only party which stands for joint approach is Italy – one of Europe’s biggest consumers of Russian gas. Italian leader, Silvio Berlusconi, believes Europe needs to be more proactive.

“Russia says it cannot provide five billion dollars to fill gas storages in Ukraine. That's why I call on Europe to share expenses. At the next session of the Council of Europe I'll offer this to the Russian Federation. So, Europe wants to take part of this problem upon itself."

The risks are high and the time presses. If Ukraine doesn't pump the gas on time Europe may yet again be left without heat this winter. President of the European Commission says they're looking very closely into the problem and promises to raise the issue at the June summit of the EU countries.