Tue, Jan 06, 2009 - Page 6 News List

Gazprom takes hard line in gas dispute

PIPELINE European countries now pay about US$500 per 1,000 cubic meters, but the price is expected to decline as the gas market begins to reflect the fall in oil prices


A woman walks past a gas pipe for a gas-compressor station in the small Ukrainian city of Boyarka, near Kiev, on Sunday.


Russia’s state-controlled gas company said it is increasing the price it wants Ukraine to pay for natural gas, hardening its position in a dispute that has decreased supplies to Europe.

Gazprom CEO Alexei Miller said Sunday that the company wanted US$450 per 1,000 cubic meters, up from its last offer of US$418.

Ukraine’s state gas company accused Gazprom of being unwilling to seek a compromise and said any price increase should be accompanied by a similar hike in the fee Ukraine gets from Russia to move gas through its pipelines on to European customers.

Russia’s tough stance in the negotiations may reflect both political and economic considerations. Gazprom, which once aspired to be the largest corporation in the world, has been hit hard by the financial crisis and is deep in debt.

The negotiations also have been hampered by strained relations between the Kremlin and Ukraine’s West-leaning government. Kiev has angered Moscow by seeking to join NATO and by supporting Georgia during its August war with Russia.

Last year, Ukraine paid US$179.50. Its state company, Naftogaz, refused Gazprom’s offer of US$250 before negotiations over a contract for this year broke down on Wednesday, prompting Gazprom to shut down gas supplies to Ukraine.

Gazprom has continued to send gas to Europe, which relies on the Russian company for a quarter of its gas. But 80 percent of the gas Gazprom sends west passes through the same pipelines that supply Ukraine, and over the past four days the pressure in the pipelines has dropped. Some European countries — Bulgaria, the Czech Republic, Hungary, Poland and Romania — have reported a decline in supplies.

Ukraine has said it has sufficient gas reserves to meet its needs for weeks.

Gazprom said he hoped Sunday’s offer would bring Naftogaz back to the table as soon as possible, but Naftogaz remained unbowed.

“We are open for negotiations if there are reasonable proposals that correspond to European market conditions,” Naftogaz spokesman Valentyn Zemlyansky said. “If the price for gas is US$450, then the transit fee will rise accordingly.”

European countries now pay about US$500 per 1,000 cubic meters, including transit costs, but the price is expected to decline significantly as the gas market begins to reflect the fall in world oil prices.

The system requires a minimum amount of gas to maintain pipeline pressure.

Russia has accused Ukraine of siphoning off gas from Russian shipments, while Ukraine has accused Gazprom of refusing to supply the gas that the system needs in order to pump fuel to Europe.

“Then they say that Ukraine is stealing it,” Zemlyansky said.

Gazprom has said it is fulfilling all of its transit obligations and insisted that the extra gas is Ukraine’s responsibility.

Gazprom also has been pumping more gas to Europe via pipelines in Belarus and the Blue Stream pipeline that sends gas to Turkey.

Bulgaria’s pipeline operator said Sunday that Russian gas supplies have dropped by up to 15 percent. Bulgargaz CEO Dimitar Gogov told Bulgarian National Radio that the situation was not yet critical. Bulgaria gets 90 percent of the gas it uses from Russia.

Joanna Zakrzewska, spokeswoman for Poland’s gas monopoly PGNiG, said deliveries arriving via Ukraine have dropped 11 percent. She said the shortfall in deliveries via Ukraine is being made up for in its entirety for now via transit routes through Belarus.

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