Sun, Jan 01, 2006 - Page 11 News List

EU gas shortage feared as Ukraine rejects price hike


Concerns were growing on Friday that gas supplies to western Europe could be disrupted after Russia and Ukraine failed to end a dispute over gas prices.

The EU said on Friday it would hold a meeting of energy ministers this week to discuss the crisis.

"The idea is to be ready for all eventualities and to have a common approach," said Amadeu Altafaj Tardio, a spokesman for the European Commission.

European officials insisted that fuel supplies to a winter-bound Europe were not likely to be badly affected by the dispute, which followed an announcement by the Russian state controlled gas monopoly Gazprom that it was increasing the price of Siberian gas to Ukraine by 360 percent. The company has given Kiev until today to comply with the terms.

Ukraine urged Russia to suspend the increase, a demand that Gazprom dismissed as unacceptable. The EU currently relies on Gazprom for 25 percent of its gas supplies. Most of this is transported via Ukraine.

If Russia makes good its threat to cut off Ukraine's supply, it will reduce the amount of gas sent through the pipeline -- which also carries Europe's share.

"The commission is still optimistic that a deal can be reached," Tardio said. "We have concerns because some member states are more dependent on Russian gas than others."

Ukrainian President Viktor Yushchenko promised not to impede transit supplies to Europe. But Gazprom warned that Kiev might divert exports destined for Germany, Italy and France.

Earlier this week, Ukrainian Prime Minister Yuri Yekhanurov said that Kiev would take 15 percent of the Russian gas crossing its territory if Moscow cut delivery for Ukrainian domestic use. A Gazprom spokesman, Sergei Kupriyanov, told reporters it could not prevent Ukraine siphoning from transit pipelines.

"Technically speaking, they could take all the gas," he said.

Germany, the company's biggest client, urged Moscow and Kiev to strike a deal as soon as possible to guarantee uninterrupted delivery.

If necessary, Gazprom will offset decreased exports to western Europe by pumping more through its pipeline across Belarus, or using underground storage reservoirs, it said yesterday.

The UK does not receive direct supplies from Russia, but a drop in supply to Europe would mean less gas being pumped through the interconnector, the pipeline that links the UK with the continent.

Moscow wants to increase the price Kiev pays for gas from US$50 per 1,000 cubic meters to US$230, which it says is in line with market prices. The move is widely interpreted as punishment for Ukraine seeking rapid integration into the EU and NATO. Russia argues it cannot sustain the lower price.

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