Russia starts cutting off gas to Ukraine

By Christian Lowe

MOSCOW (Reuters) – Russia began cutting off gas to Ukraine
in a dispute that could hit deliveries to a wintry 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 on
Sunday 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.

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 European Union.

That, say Ukrainian officials, is why the Kremlin is
punishing Ukraine with such a huge price increase while letting
more Moscow-friendly ex-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 on New Year’s Day, and its tenure is certain
to come under intense international scrutiny.

“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.

EUROPEAN DISRUPTIONS?

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 on Sunday.

Ukraine’s Emergency Ministry said no drop in the pressure
of gas arriving from Russia had been registered by about 1000
GMT.

Gazprom said if supplies to western Europe were disrupted,
Ukraine would be to blame.

“The Ukrainian authorities were determined to have a
conflict from the start, and from January 1 to … start
stealing gas from European consumers,” Kupriyanov said.

The Italian oil and gas firm Eni said it had been warned by
Gazprom that supplies could be disrupted.

Central European states have set up contingency plans.
Poland says it has at least a week’s reserves.

The EU has called a meeting of member states’ energy
officials for Wednesday to work out a common approach.

Moscow is seeking a rise in the price of gas it sells to
Ukraine to $230 per 1,000 cubic meters from the current $50 —
a level that reflects Soviet-era subsidized rates. Ukraine
agrees in principle but wants a transitional period.

Yushchenko, propelled to power in the “Orange Revolution”
of a year ago, has linked the gas switch-off to the start of
campaigning for a parliamentary election on March 26 in which
he faces a tough challenge from pro-Moscow parties.

(Additional reporting by Anatoly Titkin and Dmitry
Zhdannikov in Moscow and Olena Horodetska in Kiev)