EU, Russia To Hold Talks Over Gas Flow

by Radio Free Europe | 05 January, 2009

The European Union has scheduled talks with Russia to press for a speedy resolution of a dispute with Ukraine that has reduced gas supplies to eastern and southern Europe. Russian gas monopoly Gazprom cut off gas supplies to Ukraine on January 1 in a dispute over debts and pricing that shows no sign of ending, worrying European consumers that de...

EU, Russia to hold talks over gas flow

The European Union has scheduled talks with Russia to press for a speedy resolution of a dispute with Ukraine that has reduced gas supplies to eastern and southern Europe.

Russian gas monopoly Gazprom cut off gas supplies to Ukraine on January 1 in a dispute over debts and pricing that shows no sign of ending, worrying European consumers that depend on Russia for one-quarter of their natural gas.

A European Union fact-finding mission will meet Gazprom officials on January 6, although there was no immediate danger to EU consumers from the dispute, an EU Commission spokesman said.

The commission said the meeting would be in a European capital but the venue had not been confirmed.

"Since we are the main market for Russian gas...we have an obvious interest in applying pressure on these parties to reach as soon as possible an agreement which is definitive," Johannes Laitenberger said.

Disruptions to gas supplies that had already hit Turkey and countries in Eastern Europe spread to Croatia and Greece on January 5, energy firms said.

"The situation is worrying when someone is unable to fulfil their contract," Dimitar Gogov, chief executive of Bulgarian state gas monopoly Bulgargaz, told Reuters on January 5. His country saw a 10 to 15 percent drop in gas supplies from Russia.

The row, which mirrors a dispute three years ago that disrupted gas supplies to Europe, threatens Russian ties with the West already strained by Moscow's war in Georgia in August.

The Kremlin has long opposed Ukraine's ambition to join NATO and some Western policymakers see parallels between the Georgian conflict and Russia's treatment of Ukraine.

State-controlled Gazprom has blamed Ukraine for siphoning off or blocking deliveries of gas equivalent to one-sixth of Russia's total supplies to Europe. Its chief executive, Aleksei Miller, will meet Russian Prime Minister Vladimir Putin on January 5 for talks on the dispute, a government spokeswoman said.

Supplies of Russian gas to Greece have been cut by one-third, an official from Greek natural gas operator DEPA said, while supplies to Romania were 30 percent below contracted levels.

The European Union has also called an emergency meeting of envoys for 1330 GMT on January 5 in Brussels. The previous dispute in early 2006 led to calls for the EU to diversify its energy supplies, but it has struggled to break its reliance on Russia.

Balkans Affected
Ukraine has accused Moscow of deliberately cutting flows to Europe, where gas is in high demand as temperatures drop below zero. Kyiv has said the EU should send a signal to the Kremlin that it cannot bully its pro-Western neighbors.

Worries about the impact of the row on fuel supplies, coupled with the conflict in the Middle East, helped drive oil prices to a three-week high. Any gas shortages could drive up demand for oil products.

Hungary, Romania, and Poland have also reported small drops in supply. Supplies to the Czech Republic have been restored after a 5 percent drop on January 4.

Gazprom is demanding Ukraine pay $450 per 1,000 cubic meters of gas after Kyiv rejected a previous proposal of $418. The price is more than double what Kyiv says it is willing to pay.

Ukraine's economy, among the worst hit by the global financial crisis, is forecast to contract by between 3 percent and 5 percent this year, leaving it little room to accept the higher gas prices Russia is demanding.

The hryvnia currency was quoted weaker at 8.15-8.5 to the U.S. dollar, from 7.9-8.3, but dealers said trade was very weak.

Gazprom said it was honoring commitments to customers and was supplying additional gas through Belarus and the Blue Stream pipeline to Turkey, as well as from reserves in European underground storage.

With no negotiations in sight, Russia and Ukraine have said they would bring cases against each other in a Stockholm arbitration court that deals with international commercial disputes.