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Friday, January 2, 2009

Ukraine pleads gas case to Europe


MOSCOW (AP) — Ukraine sought support Friday in European capitals a day after Russia cut off gas supplies and hardened its stance on prices.

Russia's Foreign Ministry issued a statement saying that it, too, was ready to explain its position in the dispute to Europe, asking for a special session of the European Commission to address the question.

But there were no face-to-face talks between Ukraine and Russia as of late afternoon Friday, a day after Russia's state-controlled energy giant Gazprom cut off gas to Ukraine, saying it had failed to pay an outstanding $2.1 billion bill.

For the moment, the two countries instead fought a public relations war.

A Ukrainian delegation headed by Energy Minister Yuriy Prodan, and including the deputy chief of gas company Naftogaz, Volodymyr Chuprun, visited Prague, the Czech Republic, and Bratislava, Slovakia, on its way to Brussels for meetings with officials.

"Our aim is to explain our position to our European partners on the situation which arose in the gas sphere," Bohdan Sokolovsky, energy adviser to Ukrainian President Viktor Yushchenko, told The Associated Press in a telephone interview from Bratislava. "We are informing them on how the negotiations are going, we are stating our negotiating position."

Sokolovsky said Ukraine was trying to reassure its neighbors that it would not interrupt gas supplies.

"We told them that Ukraine is fulfilling all of its transit obligations and they have no doubts about that," he said.

Russian Deputy Foreign Minister Alexander Grushko said Friday Russia was ready to go to Brussels as well to make its case to the European Union.

Many in the West viewed a 2006 Russian cutoff of gas to Ukraine as an effort to punish Ukraine's political leaders for their pro-Western policies.

That cutoff, which temporarily affected supplies to Europe, also led to accusations that Russia was an unreliable source of energy and led to calls for greater energy independence from Moscow.

This year, Russia has taken pains to paint the conflict as a purely commercial matter, and both countries have pledged they would keep gas flowing through Ukraine's pipeline system to the rest of Europe. As of late Friday afternoon there were no reports of interruptions in shipments beyond Ukraine.

Despite the apparent absence of talks, there seemed to be little sense of urgency. Experts say both Ukraine and Europe have significant stockpiles of gas.

Germany's E.ON Ruhrgas utility said it had seen no disruption to Russian gas deliveries as of Friday — although it said any effects would not be noticeable until the beginning next week because of the distance the gas travels.

In any case, "we have nearly 25 percent of our annual needs ... in reserves, so that even if gas volumes from Russia were to be reduced, we are well prepared," German Economy Ministry spokeswoman Beatrix Brodkorb said in Berlin.

Thomas Steg, a spokesman for Chancellor Angela Merkel, called on both sides to "negotiate quickly and constructively" on a new contract.

The cutoff came after Ukraine made a $1.5 billion overdue payment, but Russia demands another $600 million, including $450 million penalties for the late payment for gas shipped in November and December. The two sides also have not agreed on prices for 2009.

Gazprom also wants to charge Ukraine higher gas prices for 2009. Ukraine, meanwhile, says Russia should pay more to ship through its pipelines, which carry 80 percent of the gas Russia sells to European Union customers.

The dispute also reflects strained relations between the two former Soviet nations that developed after Ukraine's 2004 Orange Revolution, which brought a pro-Western government to power.

Ukraine has since sought to join NATO and supported Georgia during its brief war with Russia in August — moves that angered the Kremlin.

The recent decline in energy prices has hit Russia hard, and Gazprom faces a sharp drop in demand for energy.

Experts say efforts to resolve the dispute are also hampered by divisions within Ukraine's leadership. President Yushchenko and Prime Minister Yulia Tymoshenko are bitter political rivals.

At one point Gazprom said it would accept $250 per 1,000 cubic meters of gas, close to the $235 that Ukraine has offered.

But late Thursday Gazprom CEO Alexei Miller toughened his company's stance, resuming an early demand of $418 per thousand cubic meters, the price Russia will charge European customers over the next few months.

Those prices are expected to slide considerably later this year, as the gas market begins to reflect the fall in world oil prices. Last year, Ukraine paid $179.50 per 1,000 cubic meters of gas.

Associated Press writers Maria Danilova in Ukraine, Geir Moulson in Berlin, Lynn Berry in Moscow and Robert Wielaard in Brussels contributed to this report.

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