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10 Jan, 2009 02:34

New hope for end to gas dispute

Russia says it is ready to resume pumping gas to Europe via Ukraine as soon as Kiev signs an agreement on the makeup of an international team to monitor gas flow through the country.

Moscow and Kiev, with the EU acting as mediator, are still trying to hammer out an agreement on the price Ukraine pays for its gas and the cost of transporting gas to Europe via Ukraine.

Gazprom agreed to reopen supplies of fuel to the EU via Ukraine, if an international monitoring team was put on the ground to oversee the transit of gas through the country.

Meeting with the head of Russia's energy company, President Dmitry Medvedev said that Ukraine will not be offered discounted gas prices in future. This means that Ukraine will have to pay $470 per 1,000 cubic metres of gas in the first quarter of 2009 – the same as other Eastern European countries pay.

“Last year we supplied Ukraine with gas for $179 per 1,000 cubic metres. That very same gas was re-sold to Ukrainian consumers at twice that amount. The profit in all likelihood was used to achieve someone's political goals or resolve personal problems,” Medvedev said before adding:

“In the future, we shall not make any exceptions when it comes to selling gas to any country. If there's a set price, it must be paid with no exceptions or discounts. It will first of all benefit Ukraine's own economy, and will help stabilise the political situation in the country.”

Ukraine has confirmed that Gazprom employees and representatives of Russia's Energy Ministry can be among the international monitors, the first group of whom has already arrived in Kiev.

“The purpose of our monitoring mission is to verify on an independent basis the flows of gas coming into the Ukrainian system, and to be able to compare them on an independent basis with the flows of gas that reach the European customers that Gazprom has commercial contracts with,” said Filip Cornelis, the European Commission’s Energy and Transport Director General.

The delegation consists of energy experts from all across Europe.

Ukraine’s Naftogaz also confirmed that its specialists are joining the mission.

“Experts from both sides will have access to gas meters. This was our request as well. Since we want to get an objective picture, we need all three parties to be represented – well, at least two parties. Experts and representatives of the European Commission should give their objective judgement,” said Vadim Chuprun, Ukraine’s Deputy Energy Minister.

According to Naftogaz, the experts will monitor gas flow where it enters Ukraine from Russia and where it exits Ukraine to Europe. Only then can the delegation determine whether fuel is failing to reach Europe.

Ukraine claims it is ready to resume gas deliveries to Eastern Europe within 36 hours of Russia reopening the pipes to Ukraine.

Europe has not received any gas from Russia since Moscow was forced to fully stop sending gas through Ukraine on 7 January.

Gazprom says supplies to Europe are down 86 million cubic metres since the beginning of the year.

Matters have been made worse because the continent is in the midst of bitterly cold winter snap.

Russia’s energy giant says Kiev still owes it more than $600 million for earlier gas deliveries.

Negotiations on a new contract between the two countries remain on hold.

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.