Fri, Jan 02, 2009 - Page 1 News List

Russia cuts gas supply to Ukraine

AGENCIES , MOSCOW AND BRUSSELS

Russia halted supply of natural gas to Ukraine yesterday after the two ex-Soviet neighbors failed to agree on payment terms, sparking fresh concerns about the security of energy resources controlled by Moscow.

State-run gas giant Gazprom confirmed that supply to Ukraine had been shut off at precisely 10am as planned following the expiry at midnight New Year's Eve of the old contract.

“We have reduced supply of gas to Ukraine by 100 percent,” said Gazprom spokesman Sergei Kupriyanov, putting the volume at 110 million cubic meters per day.

Ukraine's gas company, Naftogaz, separately confirmed that the volume of gas it was receiving from Russia had dropped, but promised that transit of supplies meant for customers downstream in Europe would be guaranteed.

The halt in Russian gas supply to Ukraine instantly recalled a similar cutoff in January 2006. This time however Ukraine and the EU say they have enough gas reserves to see them through the winter.

Another Gazprom spokesman said the flow of more than 300 million cubic meters per day of gas that transits through Ukraine but is destined for clients further afield in Europe was continuing unabated.

There were no immediate reports of shortfalls outside Ukraine.

Around one-fourth of the gas used in the EU — more than 40 percent of the gas imported by the bloc — comes from Russia, 80 percent of it moving in pipelines that pass through Ukraine.

The supply cutoff came after Gazprom said Ukraine had failed to pay in full for the gas it imported from Russia in November and last month — billed at US$1.6 billion — along with late payment fees totaling US$450 million.

The EU yesterday urged further negotiations to resolve the dispute.

“The [EU] presidency and the Commission urge both sides and their governments to continue negotiations and rapidly reach a successful outcome so that gas supplies to the EU are not affected,” EU president the Czech Republic and the European Commission said in a joint statement.

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