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6 Jan, 2009 20:01

Europe running out of gas

Several European countries have had their deliveries of gas through Ukraine cut off, a situation which the EU describes as “unacceptable”. Gazprom says Ukraine's energy company has shut off a number of pipelines.

Meanwhile, the head of Naftogaz has announced he is ready to resume negotiations.
Speaking at a media conference on Tuesday, the head of the board of Naftogaz of Ukraine, Oleg Dubina, said he would visit Moscow on January 8 to continue the negotiations on gas supplies.

Gazprom’s spokesman Sergey Kupriyanov said they were surprised by statements coming from Naftogaz to resume talks only on Thursday.

“Considering that the situation is critical, we are ready to start talks any minute.”

The previous round of talks ended on December 31 after which Gazprom shut down gas deliveries to its neighbour.

In all, five EU member countries – Poland, Hungary, Romania, Bulgaria and Greece – have reported that gas deliveries via Ukraine have been reduced.

Speaking at a news conference in London, Gazprom's Deputy CEO Aleksandr Medvedev said:

“We are facing this challenge together with our European partners. Actually, we became hostages of the irresponsible behaviour of the transit country through which 80 % of our [gas] export goes to Europe. It’s not even a question of a commercial dispute. It’s a question of absolute irresponsibility in handling the export flow of natural gas via Ukraine,” he said.

Russia’s energy giant Gazprom confirmed it's doing its best to compensate European customers for the gas it claims was stolen by Ukraine, but adds that its resources are not unlimited.

Earlier Gazprom said it's having to divert fuel supplies away from Ukraine. It also warned Ukraine will have to pipe its own gas reserves to Europe to make up for the fuel that Gazprom claims was stolen.

At a meeting with Russian prime minister Vladimir Putin, Gazprom CEO Aleksey Miller said there is only one thing that can be done, namely “cutting gas deliveries to the Russia-Ukraine border by the amount stolen by Ukraine – 65.3 million cubic metres.”

“In the future we propose to cut gas deliveries by the amount Ukraine steals,” he said.

Vladimir Putin gave Gazprom the green light for reducing supplies, though he said the move will unfortunately affect a lot of ordinary Ukrainian citizens who have for the last three years been caught up in the energy battle.

During this three-year period, the situation has become so predictable that every official, journalist and analyst can guess what will most likely happen – and when.

Ukraine refuses to settle its debt and move over to market prices for its gas. When supplies are finally cut off, it may resort to filling up from the European fuel it transits.

The problem recurs annually around New Year’s Eve. The only things that do change are the reasons Kiev puts forward. This year these are its contracts, which are suddenly deemed ‘not effective’. A Ukrainian court has even forbidden the transit of gas through the country, but Gazprom says that decision carries no legal weight.

According to Gazprom spokesman Sergey Kupriyanov, this decision of the Kiev economic court is totally illegitimate, because the transit relations of Gazprom and Naftogaz, its Ukrainian counterpart, are regulated by Swedish law according to the contracts, and these issues can be settled only at the Arbitration Institute of the Stockholm Chamber of Commerce.

The Ukrainian energy company Naftogaz has pulled out of negotiations and was not available to comment.

Europe's gas supplies are decreasing, and its winters getting colder. As reasons for concern increase, Brussels has called for an emergency meeting.

“At the moment gas supplies to consumers are not under threat. The EU and its member states have been able to compensate for any falls in supply”, said Radek Honzak, a spokesman for the Czech permanent representation to EU, but he added that this is, of course, a serious problem, and a solution needs to be found immediately. The Czech Republic took over the rotating six-month presidency of the European Union from France on January 1.

Gazprom has assured its customers that gas will be rerouted through Poland and Belarus. But as well as wanting to meet its obligations to its customers, the Russian energy giant evidently wants to sort out problems with Ukraine once and for all.