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Russia and Ukraine Turn Up the Heat in Dispute Over Gas

Posted on: Thursday, 29 December 2005, 09:00 CST

By Judy Dempsey

Gazprom, Russia's state-owned natural gas monopoly, has sharply criticized Ukraine after that country's prime minister said Ukraine had a right to take 15 percent of the natural gas that Russia exports via Ukraine to Western Europe, fanning a dispute that has pitted the Kremlin against a former satellite and one of Russia's most important neighbors. Characterizing Ukraine's plans as theft on Tuesday served to increase a war of words while Gazprom moved forward with plans to more than quadruple the price it charges Ukraine for natural gas at the start of the new year. The acrimony reflects a determination by both sides to hold out over a dispute that could have long-term consequences for the foreign policy of both countries. "If Ukraine holds out and manages to strike a compromise with Russia, then Russia's ambitions to restore its influence in this part of the former Soviet empire could be finished," said Bruce Jackson, president of Project on Transitional Democracies, a U.S. group that has supported former Communist countries' joining the NATO alliance.

"This is Russia's last chance to influence Ukraine," he said. "And it is no coincidence that it is using energy as its tool against President Yushchenko before Ukraine's parliamentary elections that take place in March."

President Viktor Yushchenko told President Vladimir Putin of Russia by telephone Tuesday that Ukraine was seeking liberalized prices for the supply and transit of Russian natural gas, according to a statement issued by Yushchenko's office. The two agreed that Yushchenko would send his energy minister, Ivan Plachkov, to Moscow on Wednesday as part of a continuing effort to reach a compromise on the widening dispute.

Their conversation came hours after Ukraine's prime minister, Yury Yekhanurov, drew a blistering response from Gazprom after he said the country could take 15 percent of the gas Russia exports via Ukraine to Western Europe. More than 80 percent of Russia's gas to Western Europe goes through Ukraine. Gazprom denied a report Tuesday that it had agreed to moderate the quadrupling of gas prices it has said it would start charging Ukraine as of Sunday, and said that any siphoning by Ukraine of Russian gas destined for Europe would be considered theft. "The time when a sheep could be traded for an ax has passed," Gazprom said in a statement. "The price of 150 cubic meters of gas is not the same as the transit cost for this volume of gas. Ukraine refuses to understand that."

Alexander Medvedev, deputy chairman of Gazprom, said the company was simply applying market principles to Ukraine. "Since the EU has applied a market economy status to Ukraine then Ukraine should live up to that," he said during a recent interview.

Source: International Herald Tribune

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