Gazprom shuts off gas to Ukraine...raises price...

The energy giant has set new terms for gas delivery to Ukraine which are based on fair market value. Kiev earlier failed to accept a lower offer. The country's gas supply was turned off New Year's Day due to unpaid debt.

The Russian energy giant has raised the price of gas to the European level of $US 418 per 1000 cubic meters. Ukraine had previously rejected a lower offer.

“Ukraine didn't accept the preferable gas price we offered – which was $US 250 per 1000 cubic metres,” said Gazprom CEO Alexei Miller. “So starting from January 2009, Gazprom will deliver gas to Ukraine at a market European price.”

There is still no contract signed between the two countries and debts must be paid in full before one can be signed.

The Russian energy company has also calculated over $US 600 million in penalties Ukraine owes.

Gazprom’s overall supply reduction amounted to 90 million cubic metres a day, which is roughly Ukraine’s consumption.

The Ukrainian counterpart of Gazprom – Naftogaz – confirmed that gas supplies had been cut.

“We have noticed a reduction in pressure,” it added, though according to Russia's Vesti-24 television channel, a pumping station in Slovakia hasn’t yet reported any reduction in the amount of Russian gas pumped through.

Gazprom spokesman Sergei Kupriyanov said that independent auditors are being blocked from checking whether gas supplies to Europe are being hindered.

“We don't have an effective gas delivery contract with Naftogaz now. Naftogaz is currently obstructing the operators of RosUkrEnergo and is not letting them extract the gas from underground facilities which they have,” said Kupriyanov.

Prices don’t meet

Both Ukrainian President Viktor Yushchenko and Prime Minister Yulia Timoshenko have appealed to Russia not to cut gas supplies to the country and to continue talks. They've also named the price their country is prepared to pay for the gas: $US 201 per 1,000 cubic metres, which is almost $US 50 below the price negotiated with Russia.

Ukraine has also offered guarantees of undisrupted transit of gas to Europe and proposed inviting European partners to the negotiating table.

Both Ukrainian President Viktor Yushchenko and Prime Minister Yulia Timoshenko had appealed to Russia not to cut gas supplies to the country and to continue talks. They had also named the price their country is prepared to pay for the gas: $US 201 per 1000 cubic metres, which is almost $US 50 below the price negotiated with the Russian side.

Ukraine has also offered guarantees of undisrupted transit of gas to Europe and proposed inviting European partners to the negotiating table.

Earlier Ukraine had threatened to confiscate Russian gas passing through the country, refusing to guarantee supplies to Europe as Russia promises to stop gas supplies to Ukraine due to debts. Gazprom called Ukraine’s reaction ‘blackmail’.

No choice

As Gazprom has vowed to maintain supplies to Europe in full, its gas will be entering Ukraine for the foreseeable future, at least until the Nord or South Stream is opened.

One major pipeline – bringing gas to Ukraine – passes through the town of Kursk, while a larger one – taking gas to Europe – operates in Voronezh (see picture).