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Europe

Russia Reduces Gas to Ukraine; Says Europe not at Risk

Russia began lowering the pressure of natural gas entering Ukraine's pipeline system, a spokesman for the Gazprom energy company said Sunday, assuring supplies to the rest of Europe would remain stable.

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Less natural gas is flowing through the pipes on New Year's Day

"We have been forced to start the operation to lower the pressure in Ukraine's gas pipeline system," state-controlled Gazprom's spokesman Sergei Kupriyanov told AFP after a deadline expired for Kiev to agree to a steep gas price increase as from April.

Russia and Ukraine have been locked in a bitter gas price dispute for months, sparking concerns in European Union states that depend heavily on Russian energy supplies.

"Export gas will be delivered in its totality," Kupriyanov continued, referring to deliveries to the rest of Europe.

"We were ready to come to an agreement with the Ukrainian people... Our offer was rejected," Kupriyanov said.

Europe dependent

Around a fifth of Europe's gas supply comes from Russia via Ukraine and is carried into Ukraine by a single main trunk pipeline from Russia that then branches off into the country's pipeline network and European routes further west.

Ukraine Streit um Gaslieferungen Viktor Juschtschenko

Ukraine's President Yushchenko, left, and officials at a gas sector review

Ukrainian Prime Minister Yury Yekhanurov said last week that if Moscow stopped supplying Kiev then his country of 48 million people would have the right to take 15 percent of the gas transiting through its territory to western Europe.

There was no immediate official comment from the Ukrainian government after Gazprom's announcement of the pressure reduction.

Price hike

Kiev has so far been paying 50 dollars per 1,000 cubic meters (35,316 cubic feet) of natural gas from Russia.

Gazprom, which controls a third of the world's natural gas reserves, wants $230 (195 euros), arguing that Soviet-era tariffs no longer apply and the price needs to be aligned with market rates.

Kiev has said it can pay more over a transitional period but Gazprom said it would shut down Ukraine's gas supply from January 1 unless Kiev agreed to the higher price immediately.

Last-minute diplomatic moves by Russian President Vladimir Putin and Ukrainian President Viktor Yushchenko failed to prevent the stoppage.

Hauptquartier von Gazprom

Gazprom headquarters in Moscow

Putin offered to maintain gas supplies at the current price until April but only on condition that a deal be struck by a midnight deadline on New Year and that Ukraine agree to a more than four-fold price increase thereafter.

Gazprom said Ukraine rejected the deal, though Ukrainian officials said late Saturday that they were "surprised" by the announcement and that Russia had agreed Ukraine could pay 50 dollars for the first quarter of 2006.

Enough for the winter?

Ukraine depends on Russia for around a third of its natural gas supplies, importing some 25 billion cubic metres per year, and many ordinary Ukrainians have expressed alarm despite official assurances that the country has enough reserves to last the winter.

Ukraine Russland Streit um Gaslieferungen Demonstration Kiew

Protest over the gas conflict in front of the Russian embassy in Kiev

In a New Year's address, Yushchenko called on Ukrainians to ensure the country's "economic independence," invoking a popular revolt that brought him to power in a presidential election last year against a Russian-backed candidate.

"A year ago we beat the dictatorship and won a real victory," Yushchenko said. "Today we have to go a step further to ensure together Ukraine's economic independence."

Russia maintains the dispute is purely commercial but Ukraine, which was once part of the Soviet Union but has been increasingly at odds with Russian authorities over its firmly pro-West orientation, says that it is under political pressure from Moscow.

EU meets over issue

The European Commission, the EU's executive arm, has called a special meeting of its gas coordination group for Wednesday to discuss the Russia-Ukraine row.

Austria, which took over the EU presidency Sunday, as well as France, Germany and Italy have asked Russian and Ukrainian energy officials that gas supplies "be maintained to their full extent."

As the row with Russia deepened, Kiev signed an agreement last week with the Central Asian state of Turkmenistan, which has some of the largest gas reserves in the world, to supply 40 billion cubic meters of gas to Ukraine at 50 dollars per 1,000 cubic meters.

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