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Gas Deal in Sight?

DPA news agency (sp)January 16, 2009

Following talks with Chancellor Merkel, Russian Prime Minister Putin says he's hopeful of reaching a deal to deliver gas to European customers after a row with Ukraine that has cut supplies since the start of the year.

Vladimir Putin with Angela Merkel
Bundled up against the cold, Putin and Merkel said they were close to resolving the gas rowImage: AP

Speaking to reporters in Berlin after talks with German Chancellor Angela Merkel, Putin said Western gas importers could play a role in ending the blockade that has cut supplies of gas via Ukraine and left large parts of Europe without heating.

"I believe we can reach an agreement that will resolve the situation and lead to the transit of Russian gas," he said through an interpreter.

Merkel told reporters there might be a test phase where gas pumping was resumed under monitoring by European Union inspectors.

She said the inspectors would check the pipeline transit system to ensure that gas destined for Western Europe "does not disappear in Ukraine."

"Time is of the essence"

Despite a series of agreements, Russian gas exports via Ukraine remained cut off for the 10th day Friday, leaving some European countries without sufficient fuel to heat homes and factories.

"Technical" gas is at the focus of the ongoing dispute because Ukraine insists it has a right to remove 21 million cubic meters of gas daily to power the pumps whereas Russia accuses the Ukrainians of "stealing" the gas. Ukraine denies the accusation.

"I think we will eventually find a solution," said Merkel, who appealed to both Russia and the Ukraine to return to the negotiating to end what was essentially a commercial dispute.

"Time is of the essence," she said, adding that a settlement was also in the interests of Russia and Gazprom. Otherwise there would be a loss of confidence in them, she said.

"Last chance" to resolve the dispute

Putin earlier met executives of E.ON Ruhrgas of Germany, ENI of Italy and Gaz de France in a Berlin hotel.

The Russian premier proposed that a Western consortium pay for technical gas, which is removed from the pipeline to run the equipment that keep the remainder of the gas moving westwards.

Putin said the cost of the gas to power the pumps would be $730 million in the first quarter of this year alone. He said that strictly speaking, it should be Ukraine that paid to power the pumps.

Although Germany is still receiving Russian gas via Belarus and has high stocks -- 59 per cent of maximum storage capacity as of Monday this week -- it is pressing for a quick end to the Kiev-Moscow dispute.

Merkel phoned Ukraine's leaders on Thursday, before her meeting with Putin, who was paying his first visit to Germany since leaving the Russian presidency and becoming prime minister in May 2008.

The European Union relies on Russia for about 20 per cent of its natural gas. Germany, Europe's biggest economy, gets 37 per cent of

its gas supplies from Russia.

Putin is due to meet Ukrainian Prime Minister Yulia Tymoshenko for talks on energy in Moscow on Saturday. On Friday, senior officials

from Eastern Europe gathered in Kiev for a blitz energy summit.

"The European Commission believes that the meetings in the coming days offer the last and best chance for Russia and Ukraine to demonstrate they are serious about resolving this dispute," Commission spokesman Johannes Laitenberger said. "The gas must flow. We will regard this period as a test case for judging whether or not they are credible partners."

Controversy in Dresden

Following his talks with Merkel, Putin travelled to the eastern city of Dresden to pick up an award for promoting Russo-German cultural relations.

A German human rights group, the Society for Threatened Peoples, said Putin did not deserve the honor because of atrocities committed

by Russian troops in Chechnya during his time as president.

Putin served as a Soviet KGB officer in Dresden until the fall of the Berlin Wall in 1989.