Community News

Thursday, January 8, 2009

Russia, Ukraine falter on resuming gas for Europe

January 8, 2008

By Lynn Berry, Associated Press Writer

Russia's Vladimir Putin blames Ukraine for gas dispute; Europe shivers but no end in sight

NOVO-OGARYOVO, Russia (AP) -- Prime Minister Vladimir Putin accused the European Union of moving too slowly to help negotiate an end to the gas dispute between Russia and Ukraine, as a deal to dispatch EU pipeline monitors appeared to unravel Thursday.

EU governments criticized both countries, saying it was unacceptable to see homes unheated, businesses closing and schools shut down due to gas shortages because neither Russia nor Ukraine could stick to its supply contracts.

The chiefs of Russia's state-controlled gas monopoly Gazprom and Ukraine's Naftogaz held talks Thursday for the first time since negotiations collapsed on New Year's Eve over 2009 gas prices. Russia said it was willing to resume pumping natural gas to Europe through Ukrainian pipelines as soon as monitors were in place to verify the gas flow.

But a deal to send international monitors unraveled late Thursday over Gazprom's insistence that Russians be among the observers in Ukraine. Kiev had agreed to EU monitors, not Russians.

"This is an issue between Russia and Ukraine," said EU Energy Commissioner Andris Piebalgs.

But Gazprom stuck to its position, and Putin urged the EU to resolve the situation.

"Our European partners must act quickly in these unusual conditions," Putin told journalists at his residence outside Moscow.

Russia stopped all natural gas supplies to Ukraine on Jan. 1 but kept supplies flowing to Europe through Ukraine's pipelines until Wednesday, when all deliveries stopped. Russia accused Ukraine of siphoning off gas intended for European customers. Ukraine denies this.

Gazprom and Naftogaz continued to blame each other during visits Thursday to Brussels. But Gazprom CEO Alexei Miller and Naftogaz's Oleh Dubina returned together to Russia to continue talks.

Miller suggested that countries that believe they have suffered from the gas cutoff could sue Ukraine. Ukrainian officials alleged Russia was trying to destroy Naftogaz and the Ukrainian economy during the global financial meltdown.

Putin said Ukraine must pay the current European price for natural gas, which is more than twice what Ukraine paid last year. Russia then would agree to double the fee it pays to ship that gas over Ukrainian pipelines to Europe, he said.

Only by moving to a transparent market arrangement, Putin said, can Russia and Ukraine prevent a repeat of the gas dispute that has led to a shutoff of Russian gas supplies to more than a dozen countries.

Putin blamed Ukraine's political infighting and what he described as high-level corruption for the failure to reach a deal.

Europeans were reluctant to get drawn in.

"The EU is not going to take sides," said European Commission diplomat Gunnar Wiegand.

Europe depends on Russia for one-quarter of its natural gas, and about 80 percent of that is shipped through pipelines crossing Ukraine. Other smaller pipelines run through Belarus and Turkey.

At least 15 nations -- Austria, Bulgaria, Bosnia, Croatia, the Czech Republic, France, Greece, Hungary, Italy, Macedonia, Romania, Serbia, Slovakia, Slovenia and Turkey -- all reported a halt in Russian gas shipments by Wednesday. Germany and Poland also reported substantial drops in supplies.

The gas dispute came amid a major cold snap. At least 11 people have frozen to death this week in Europe, including 10 people in Poland, where temperatures sunk to minus 13 degrees Fahrenheit (minus 25 Celsius ).

The lack of heat was wearing on many, especially in eastern Europe. Angry Bulgarians protested in front of the Ukrainian Embassy in Sofia on Thursday, holding signs "We are not hostages" and accusing Russia and Ukraine of being "gas terrorists."

Orthodox priests fired up wood-burning stoves in Bulgaria to keep their churches warm, while residents of the capital blew on their hands as they rode unheated trams.

In Bosnia, which does not have any gas reserves, woodcutters braved below-freezing temperatures as people turned to their fireplaces or stoves for heat.

Manufacturers in Bulgaria, Hungary, and Slovakia were slammed by government-decreed gas rationing or outright shortages. Bulgarian Economy Minister Petar Dimitrov said 152 companies have reported losses totaling euro4.3 million ($5.9 million) per day.

Slovakia, which declared a state of emergency, ordered 1,000 companies across the country to reduce gas consumption so that homes, hospitals and schools could get heat.

In Hungary, power plants were asked to switch from gas to other fuels, mainly oil or even coal, and rationing was blamed for scores of factory closings, including carmaker Magyar Suzuki, Canadian train manufacturer Bombardier and even Pick, makers of Hungary's most famous salami.

Hungary also said it would sell natural gas Thursday to neighboring Serbia, where the heating situation was even worse.

Associated Press writers Aoife White and Raf Casert in Brussels, Belgium, and Maria Danilova in Kiev, Ukraine contributed to this story.

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