Russia Halts Natural Gas Sales to Ukraine

By JIM HEINTZ

MOSCOW – Russia’s natural gas monopoly Gazprom halted sales to Ukraine in a price dispute Sunday and began reducing pressure in transmission lines that also carry substantial gas supplies to Western Europe.

Ukraine’s natural gas company Naftogaz acknowledged the reduction.

“Gas is not flowing at all through some transit routes, which can lead to a fall in pressure in all the pipelines and limit the overall supply of gas to Ukraine and Europe,” said Naftogaz spokesman Eduard Zaniuk.

However, “for the people and municipal services there will be enough gas.”

OAO Gazprom had given Ukraine a deadline of midnight Saturday to agree to pay quadruple the amount it previously paid for Russian gas, which accounts for about a third of the consumption in the country of 48 million.

Gazprom had said its official sales cutoff to Ukraine would be 10 a.m. However, even before that deadline, company spokesman Sergei Kuprianov said pressure in the pipelines was being reduced.

“Export gas for Europe is moving at full volume,” Kuprianov said in comments shown on Russian television.

Gazprom provides about half the gas consumed in the European Union, and some 80 percent of that amount is sent in pipelines that cross Ukraine. The price dispute has raised wide concerns that European supplies could be affected.

Supply problems to Europe could undermine Western trust in Russia’s natural gas industry, one of the keystones of the country’s economy, and tarnish Russia’s stint as chairman of the Group of Eight, which formally started Sunday.

A Foreign Ministry statement Sunday said Russia would “strictly fulfill” its supply commitments to Europe and that “responsibility for any possible … problems for European countries caused by the actions of Kiev will lie with Ukraine.”

EU spokeswoman Mireille Thom said energy experts would meet Wednesday to look at the situation and discuss how European countries should react.

“We hope the two parties will find an agreement quite soon,” she said.

EU Energy Commissioner Andris Piebalgs said last week that Europe could cope with a temporary interruption to its gas supply.

Ukrainian officials have said previously that its transit arrangements would allow it to siphon off up to 15 percent of the gas moving through the country. Russia says that would be outright theft.

Ukrainian officials have said the country has sufficient gas reserves to weather a Gazprom cutoff for at least several weeks but have declined to specify how much is in reserve.

Despite Ukraine’s claims, Kuprianov predicted the country would suffer quick and severe effects.

Ukraine’s refusal “to meet our proposals for resolving the problems will have catastrophic consequences for the economy of Ukraine and, unfortunately, for the brotherly Ukrainian people,” he said.

A key issue for Ukraine will be the delivery of gas from Turkmenistan, which has been the country’s single-largest supplier. On Sunday, Turkmen President Saparmurat Niyazov said 40 billion cubic meters would be delivered to Ukraine this year – about the same amount as last year – which comes via pipelines transiting Russia.

However, Gazprom this year is significantly increasing its own purchases of Turkmen gas, which some analysts suggested could bring a reduction in supplies to Ukraine. Kuprianov told The Associated Press that according to the Russian-Turkmen contract, Turkmenistan delivers 141 million cubic meters to Gazprom every day.

“We know that if 141 million cubic meters are delivered every day, there will be no technical capabilities for Turkmenistan to deliver there (to Ukraine),” he said.

On Saturday, Russian President Vladimir Putin said Ukraine could continue paying the old, lower price of $50 per 1,000 cubic meters for the first quarter of 2006, but only if Ukraine agreed by the end of the day to start paying the new price of $230 in the second quarter of the year.

Kuprianov said Ukraine refused the offer.

Gazprom has said the price increase was necessary to conform to world gas price levels.

Ukraine has not objected to adjusting the market conditions but wants an increase to be phased in gradually. President Viktor Yushchenko said late Friday that the most his country is willing to pay now is $80 per 1,000 cubic meters.

The showdown has underlined the tension boiling between the former Soviet republics since the West-leaning Yushchenko – who wants to reduce Moscow’s clout in his country – beat his Russian-backed rival in a bitter electoral battle a year ago.

The gas crisis comes as Ukraine prepares for parliamentary elections in March, in which Yushchenko’s bloc faces an apparently strong challenge from the party of Viktor Yanukovych, the Kremlin-back candidate he defeated for president.

The Russian Foreign Ministry on Sunday said “there is an impression that the current Ukrainian authorities, feeling themselves insecure, consciously decided to ruin the talks process with the Russian side and to use the gas problem almost to create the image of an enemy with the goal of manipulating the internal political situation.”

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Associated Press reporter Aleksandar Vasovic in Kiev, Ukraine, contributed to this report.