Mon, Dec 29, 2008 - Page 6 News List

Gazprom threatens to cut off Ukraine

TOUGH SPOT Norway’s StatoilHydro, which is Europe’s second-largest distributor of gas, said it could not increase production if the Russian giant halted deliveries


Russian energy giant Gazprom said on Saturday that there was a 50-50 chance that Russia would cut off gas supplies to Ukraine on Jan. 1 over Kiev’s failure to pay its debts.

“I think it’s 50-50,” Gazprom spokesman Sergei Kupriyanov told radio station Moscow Echo in an interview, when asked if Russia would cut gas deliveries or the two sides would clinch a last minute deal.

Gazprom said that Ukraine’s state gas company Naftogaz owes it more than US$2billion for natural gas delivered last month and this month and fines for late payment.

It also said Kiev had warned it would be unable to repay the debt by the end of the year as revenues from its gas consumers are insufficient.

This has paved the way for a showdown at New Year as Gazprom has said it would not sign a new contract with Ukraine unless the debts were settled in full.

Meanwhile, Norway’s StatoilHydro — Europe’s second-largest gas distributor after Gazprom — said on Saturday it would not be able to increase production if the Russian giant halted deliveries to Ukraine or the EU.

“In winter, we’re more or less at full capacity. If there is a higher demand, we cannot really produce more,” corporate affairs head Ola Morten Aanestad said.

Russian President Dmitry Medvedev told Ukraine’s government last week to pay up to the “last ruble” or face cuts of natural gas supplies or even sanctions against its wider economy.

Russian news agencies reported on Saturday that Russian Prime Minister Vladimir Putin had a telephone conversation with Ukrainian Prime Minister Yulia Tymoshenko on “questions of cooperation in the energy field.”

They quoted Russian government spokesman Dmitry Peskov as saying that the call came from the Ukrainian side.

Kupriyanov said negotiating efforts in the final days of the year would be focused on ways for Ukraine to pay its debts through other means, such as the transit fees that Russia pays for sending gas across its territory.

“In the last days of the year we are trying to find ways other than monetary ones to settle these debts,” Kupriyanov said. “I hope that in the remaining days we will succeed in doing this.”

Disputes over Gazprom’s desire to raise prices for Ukraine closer to those paid by Western European customers are also holding up negotiations.

Ukraine pays Russia US$179.5 for 1,000m³ of gas, but Gazprom has warned that price could rise to US$400 for 1,000m³ from next year.

“We cannot name an exact figure for 2009, but the price for Ukraine will be higher than the current level,” Kupriyanov said.

He said if Ukraine’s leaders really believed their statements that US$100 was an appropriate price for the gas then they could “go on the market and buy it.”

Ukraine is a major transit country for Russian gas exports to the EU and a dispute over gas prices led to a brief interruption of gas supplies in several EU countries in January 2006.

Gazprom has said it will fufill its obligations to Europe, but has also warned it cannot rule out disruptions to European supplies if Ukraine siphons off transit gas during a crisis.

Ukraine, which has tense relations with Moscow, is expected by analysts to plunge into recession next year as a result of the economic crisis and suffers from political turmoil amid a feud between its president and prime minister.

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