Moscow – Kiev gas row enters third week

International News Editor 15 January 2009

Hundreds of thousands of people across Europe have been suffering bitterly cold winter temperatures without gas after Russia halted supplies on the 7th January.

Causing this desperate situation was a disagreement between Russia and Ukraine over gas fees for 2009. Meanwhile, Russian state energy company, Gazprom, demanded the payment of backdated bills and fines for late payments from the Ukrainian energy firm, Naftogaz, amounting to nearly $2bn.

After failing to reach any agreement, Russia turned off gas supplies to Ukraine on New Year’s Day, saying it would pump only enough for customers further down the line. However, following accusations that Ukraine was siphoning off some of this gas for its own use, Russia stopped the supply altogether. The repercussions have been felt in more than fifteen countries.

Currently, a quarter of the EU’s demand for gas is supplied by Russia, 80% of which is piped via Ukraine. Among the countries facing the most serious shortages are Bulgaria, Serbia and Bosnia, who are almost entirely dependent on these supplies.

The crisis has sparked new fears about European reliance on Russian gas, with Bulgaria saying it will seek financial aid from the EU in order to ease its dependence on Russia through expanding storage and building pipeline links to Greece and Romania. Like Slovakia, it has also considered restarting a nuclear reactor to produce electricity.

“Russia’s image as a reliable energy supplier is hurt,” Russia’s state controlled VTB bank said in a research note.

An EU-brokered deal was reached on Monday, allowing EU and Russian observers to monitor transit across Ukraine’s borders to ensure that no gas is being siphoned off, an accusation Kiev denies. Following the signing of the deal in Brussels, Gazprom ordered the resumption of gas supplies through Ukraine for other European customers. However, only hours after EU monitors could confirm that ‘very limited’ amounts of gas had began flowing again on Tuesday, Russia accused Ukraine of blocking off the supply to Europe:

“The taps on the Ukrainian side are simply closed,” said Sergei Kupriyanov, a spokesman for Gazprom.

The Ukraine blamed ‘technical difficulties’, claiming that the pressure of gas arriving from Russia was too low. BBC correspondent, Rupert Wingfield-Hayes, says that the latest twist in the dispute is symptomatic of the total lack of trust between the two countries.

Speaking on Wednesday, president of the European Commission, Jose Manuel Barroso, said he would advise EU energy companies to sue unless Gazprom and Naftogaz move fast to restore supplies.

Sophie Rodger

International News Editor