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8 Jan, 2009 22:12

Gas talks end in failure

Negotiations in Brussels to resume Russian gas supplies to Europe via Ukraine have broken up without agreement.

The talks appear to have stumbled over the issue of who should be included in the international group sent to Ukraine to monitor the transit of gas.

Earlier, the EU and Kiev reached a bilateral agreement for European observers to travel to the country. However, Russia's Gazprom insisted company representatives should be included, a demand Kiev flatly rejected.

The aim of the inspectors is to make sure that no Russian gas is syphoned off once the flow restarts.

Gazprom CEO Aleksey Miller has blamed Ukraine for the failure of the negotiations.

“Ukraine has blocked the signing of the document to create a transit monitoring mission that would include experts from Europe and from Gazprom. We had a chance to resume supplies on Thursday but it didn’t happen. It’s Ukraine that should be held responsible for that failure,” Miller said.

Meanwhile, the European Commission has warned Ukraine it may face multi-million euro law suits if it is proven it has been syphoning off gas intended for European customers.

Europe's Energy Charter Treaty guarantees nations a right to an interrupted gas supply. It was ratified in 1994 by 51 countries, including Ukraine. According to Miller, Ukraine has been breaking several of its conditions.

A delegation from Gazprom arrived in Brussels on Thursday to discuss the ongoing dispute over gas deliveries to European countries. The Russian company brought with it a range of documents including the most recent Russian–Ukrainian transit contract. Representatives from Naftogas, Ukraine’s state-run gas company, also took part in Thursday’s consultations.

EU reaction

While talks continued in Brussels, EU prime ministers meeting in Prague were busy putting together a document entitled “The declaration on the Russia-Ukraine problem and energy security”.

The EU, which until now distanced itself from what it has described as a commercial dispute, has drastically switched its position. Thursday’s declaration says the EU will help settle the dispute, since it affects so many of its member states.

However, it avoids the “blame game”, which has been so keenly played by other worldwide observers since the conflict began. Nevertheless, the EU calls for Russia and Ukraine to resolve the gas row as quickly as possible. The president of the EU Parliament, Hans-Gert Poettering, insisted that “the contracts we have and the member states have are going to be fulfilled.”

He added: “The problems which are there between Russia and Ukraine must be resolved, but we cannot be the victim.”

It seems clear that while the EU is prepared to help resolve the dispute, it is not going to act as a referee in the price war between Moscow and Kiev.

Meanwhile, speaking at his residence outside Moscow, Vladimir Putin announced that Russia is ready to pay a market price for the transit of Russian gas through Ukraine. But only if Kiev pays the market price for Russian gas – $470 per thousand cubic metres.

Made worse by weather

Suffering a bitterly cold spell, Europe has been keen for Russia and Ukraine to resolve their dispute as soon as possible. Nearly two thirds of Europe’s member states have reported feeling the effects of the gas supply cut.

Some countries have coped better than others: Germany and the Czech Republic have their own gas reserves and other supply routes which allow them to handle gas shortages. Poland can bypass Ukraine by using alternative transit routes through Belarus.

Slovakia, on the other hand, was forced to declare a state of emergency because of shortages. There has even been talk of re-opening a Soviet-era nuclear power plant, the closure of which had been a requirement for Slovakia joining the EU.

Similarly, Bulgaria is experiencing significant problems, reporting that thousands of households have been left without heating in the freezing cold. Dozens of factories have also been forced to cut production.

Ukrainian officials say the country has large gas reserves, which will allow it to cope through the winter without having to rely on Russian imports. However, there have been reports of several heating stations in Kiev switching to oil instead of gas.