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16 Jan, 2009 18:10

Putin agrees on gas consortium with European gas companies

Russia’s Prime Minister Vladimir Putin has agreed upon principles for a gas consortium with the heads of Italy’s Eni, Gaz de France and German Ruhrgas.

The consortium was proposed by Russia in order to supply Ukraine with ‘process’ gas they demand for Russian gas transit to Europe.


Chronology of Russia-Ukraine gas war

The current gas cuts are the culmination of a long gas war between Russia and Ukraine, RT looks back at its latest chapter, starting back in October 2007 and the ongoing crisis, the effect of which is now being felt all around Europe.

Gas war chronology

Ukrainian Prime Minister Yulia Timoshenko’s cabinet continues to request ‘process gas’ for technological needs if Gazprom wants transit resumed.

“Ukraine has addressed us with a strange proposal to hand over this gas to them for free,” said Russia’s Prime Minister Vladimir Putin. “They want to buy it, but get it for free. I wouldn’t like to comment on that absurd proposal,” Putin added.

So the Russian side put forward another solution, voiced by Putin:

“We propose that our major European partners share transit risks with us and set up an international consortium which could buy from Gazprom the amount of gas our Ukrainian partners need and send this amount of gas immediately to Ukraine to provide a transit of Russian gas to Europe”.

The majority of countries affected by the gas crisis – including Russia, the European Union and other non-EU affected countries such as Serbia – are due to attend the crunch talks on Saturday in Moscow. Ukraine will not be in attendance as Kiev is hosting its own talks.

Slovakia's President Ivan Gašparovič, Moldova's Prime Minister Zinaida Greceanîi and Poland's Foreign Minister RadosÅ‚aw Sikorski have met with Ukrainian President Viktor Yushchenko. Earlier it was announced that Polish President Lech Kaczynski would take part in the meeting, but he ended up not traveling.

Earlier during a telephone conversation Russia’s President Dmitry Medvedev informed Britain’s Prime Minister Gordon Brown that Ukraine, for its own needs, has siphoned off the gas earmarked for European consumers and, according to him, Ukraine does not deny doing so.

Ukraine’s refusal to let gas pass through its territory is now official, having been signed and sealed by the representatives of Gazprom, Ukraine’s Naftogaz and European observers. The document says that from January 13 2009 the gas flow monitoring station is in full working order. The monitoring devices at the Sudzha station in Russia’s Kursk region, bordering with Ukraine, show that the pressure is almost 70 bars, but Ukraine is still not accepting the gas transit

The Ukrainian leadership looks lost amidst its own statements. President Viktor Yushchenko does not admit that Russia’s sending gas to Europe, and instead insists Russia should pump more to get it going.

Europe's dependence on Russian gas

According to Gazprom, Kiev simply refuses to resume the transit.

“There has been no political decision taken by the Ukrainian side to resume gas deliveries,” said Gazprom spokesman Sergey Kupriyanov. “On the dispatcher level we received information that there really is the technical possibility of accepting gas into the system, but in the phone conversation Naftogaz Chairman Oleg Dubina has said that the company will not do it”.

Russian officials believe Russia and Europe have become victims of the political crisis in Ukraine. The outcome is too dependent on the whim of Kiev’s politicians busily carving up the pie.

“The margin in the price of Russian gas that gets into Ukraine and the selling price on the internal Ukrainian market is approximately $US 14 million a day, or at least it was last year,” said Konstantin Kosachev, head of the State Duma Foreign Affairs Committee.

“I believe that no one in the world would dare to call this sum unattractive. I'm sure in the conditions of economic hardship in Ukraine there are more than enough people who are willing to fight for this sum of money to the end, and this is the battle we are witnessing right now”.

This ‘Groundhog Day’ scenario began weeks ago, but seems far from having a happy ending. With every step forward there seems to always be a step back. The Ukrainian Prime Minister is in no hurry to resolve the crisis. At a government meeting Yulia Timoshenko announced Ukraine has plenty of gas in its store and is in no need to rush with the talks, which is hardly a comfort for the freezing European consumers who are switching to wood and coal.

Eighteen European countries which rely on gas from Russia's Gazprom have either run dry or have drastically low supplies, because Kiev has prevented the flow of fuel through Ukraine. Many households are suffering without heat in bitterly cold weather with businesses and industrial plants forced to close.

Europe gets around a fifth of its gas from Russia via Ukraine, with Eastern and Central Europe worst hit since the Kiev cut-off.

The European Commission says that if the current crisis is not resolved in the following few days, it will have to review its ties with both Moscow and Kiev.

No gas since January 7

On January 7 2009, Ukraine shut all four pipelines that send gas to Europe, causing several countries to run out of fuel. Before that Ukraine was stealing the Russian gas bound for European consumers, according to Gazprom and the results of an independent monitoring by a national resource analysts’ group from Switzerland. After that Russia made a decision to stop gas supplies via Ukraine to prevent the illegal siphoning.

Ukraine also insists Russia should supply ‘process gas’ (maintenance gas needed to keep product flowing through the pipes) before it can guarantee the uninterrupted transit of supplies to Europe. However, Gazprom dismisses the idea, saying Ukraine has to pay for process gas or buy it elsewhere according to the contract between the Russian and the Ukrainian gas companies.