Mon, Jan 02, 2006 - Page 1 News List

Russia begins to ratchet down gas supplies to Ukraine

AGENCIES , MOSCOW AND KIEV

Russia began cutting off gas to Ukraine in a dispute that could hit deliveries to a wintery Europe on the very day that Moscow began its first term as chairman of the Group of Eight industrialized nations.

The Russian state-owned supplier, Gazprom, said it had begun reducing pressure in the pipeline supplying Ukraine yesterday after Kiev refused to pay the increased price Moscow was demanding.

"In this situation, which is the fault of the Ukrainian side, we have been forced to start reducing pressure in the pipeline to Ukraine," Gazprom spokesman Sergei Kupriyanov told a news briefing.

In Kiev, Ukraine's state energy company Naftogaz confirmed it had registered a reduction in gas supplies from Russia that began earlier yesterday, Interfax-Ukraine news agency reported, citing company spokesman Eduard Zaniuk.

Also yesterday, Ukraine's emergency situations ministry said a special crisis center had been set up to deal with the effects of the reduction, which was prompted by Kiev's rejection of Moscow's offer to maintain current gas prices until April, on condition that Ukraine then accept massive price hikes.

Gazprom supplies 25 percent of western Europe's gas -- most via Ukraine. It insisted deliveries to western Europe would not be affected but Italy's gas importer said Gazprom had warned it that disruption was possible.

Though Russia says it is purely a business dispute, the gas cut-off has fed concern from Washington to Berlin that the Kremlin is prepared to use its control over its massive energy resources as a political weapon.

Ukraine's Western-leaning president, Viktor Yushchenko, has irked many in Moscow by trying to take his ex-Soviet state on Russia's western border into NATO and the EU.

That, say Ukrainian officials, is why the Kremlin is punishing Ukraine with such a huge price increase while allowing more Moscow-friendly former-Soviet states such as Belarus go on paying far less for Russian gas.

Moscow took over the rotating G8 chairmanship for the first time from Britain yesterday, and its tenure is certain to come under intense scrutiny from the international community.

"Russia wants to make energy security its key message to the G8 community, and simultaneously it is becoming a source of danger, intentionally or unintentionally," said Valery Nesterov, energy analyst at Troika Dialog brokerage in Moscow.

Gazprom's decision to start cutting gas pressure effectively means the Russian gas allotted for Ukraine's consumption is being taken out of the pipeline system.

Moscow insists this will leave enough gas to continue supplying western Europe as normal -- provided Ukraine does not dip into supplies being pumped further afield. Eighty percent of Russian gas exports to western Europe pass through Ukraine.

Russia's NTV television -- owned by Gazprom -- quoted Alexander Nemudrov, a Gazprom official at a pumping station in Slovakia, as saying gas flow out of Ukraine was already falling.

That suggested Ukraine was making up for a shortfall by drawing gas intended for other countries. Gazprom officials in Moscow said they would not know definitely if that was the case until later yesterday.

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