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Europe

EU to Review Gas Supplies Amid Russia-Ukraine Standoff

The European Commission on Friday called a special meeting to review gas supplies amid concern about the knock-on effect if Russia goes ahead with a threat to cut the flow to Ukraine in a flaring dispute over gas prices.

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The EU is worried about the effect the dispute will have on its markets

European Union energy commissioner Andris Piebalgs decided to call the meeting of European gas experts next Wednesday in order "to deal with all eventualities" linked to the dispute, which the commission said it is following "very closely."

"The meeting of the gas supply group will enable the (European) Commission to establish the situation on the ground with respect to longer term issues and to discuss the appropriate European response," the commission said in a statement.

In the latest development in the feud, Russian state-controlled gas giant Gazprom rejected earlier Friday a last-ditch appeal from Ukraine for the extension of a deadline to pay four times as much for Russian natural gas or have supplies cut off from Sunday.

Gazprom, which holds a third of the world's natural gas reserves, wants Ukraine to pay $230 (185-194 euros) per 1,000 cubic metres (35,316 cubic feet) of gas, up from the current price of $50, from the start of 2006.

Ukraine says it is ready to pay more but not so quickly.

Alarm bells ringing

Gasprom Chef Alexej Miller

Russia's natural gas giant Gazprom chief Alexei Miller

Alarm bells are ringing in the EU, which depends on Russia to supply about a quarter of its gas needs, because to cut off Ukraine, Gazprom will simply reduce the amount of gas running through the main pipeline that serves both Ukraine and Europe.

"The commission is concerned, but remains confident that an agreement will be reached between the parties and that both Russia and Ukraine will honor their commitments to supply European gas markets as they have at all times in the past," it added.

Gazprom's chief Alexei Miller has said the company had a "detailed plan of measures" to guarantee EU supplies.

Nevertheless, if Kiev compensates for its lost share by dipping into the gas destined for Europe that could result in a deficit further down the line.

Cold weather causing concern

The commission was "confident" that the dispute would not lead to a shortage just as demand spikes in Europe on account of cold winter weather.

"Even if a limited part of European supplies were to be interrupted, given the level of gas stocks and supplies from other areas, the (European) Commission is confident that this would not cause a gas shortage in Europe in the short term," it said.

About a quarter of the EU's gas supply comes from Russia, and most of that transits through a pipeline in Ukraine although an alternate route exists through Belarus.

The dispute has highlighted Europe's growing dependency on foreign natural gas, especially from Russia.

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