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Russia Closes Natural Gas Tap -- Halts Sales to Ukraine in Price Feud

Posted on: Tuesday, 3 January 2006, 12:00 CST

By Jim Heintz Associated Press

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

Ukraine's natural gas company Naftogaz acknowledged the reduction by Russia's Gazprom.

"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," Naftogaz spokesman Eduard Zaniuk said. However, he said, "for the people and municipal services there will be enough gas."

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 people.

Gazprom supplies about one-quarter of the gas consumed in Europe. Most of that goes through pipes that cross Ukraine, and the dispute has raised worries of widespread supply disruptions throughout much of the continent.

"There is information that Ukraine has begun siphoning off Russian gas that is designated for European users," Gazprom spokesman Sergei Kuprianov was quoted by Russian news agencies as saying Sunday evening, about eight hours after Gazprom announced it was stopping deliveries to Ukraine.

Ukrainian Prime Minister Yuriy Yekhanurov hotly denied the allegation, saying "today we are not using a single cubic meter of Russian gas."

In Washington, U.S. State Department spokesman Sean McCormack said in a statement that "such an abrupt stop creates insecurity in the energy sector in the region and raises serious questions about the use of energy to exert political pressure."

The supply restrictions were felt immediately. In Hungary, which takes Russian gas that has flowed through pipes in Ukraine, major power users were asked to switch to using oil as Russian gas supplies fell by 25 percent.

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Political backdrop

The showdown over natural gas has underlined the tensions between Moscow and Kiev since Ukrainian President Viktor Yushchenko defeated a Russian-backed rival in a bitter electoral battle a year ago.

Yushchenko is a West-leaning reformer who wants to reduce Moscow's clout in his country. Yushchenko seeks entry into NATO and the European Union, but Russia wishes to keep the former Soviet republic under Moscow's influence, as a political bulwark against the West and a dependable consumer of Russian goods.

Ukraine has accused Moscow and Gazprom, Russia's natural gas giant, of manipulating the gas dispute to undermine Yushchenko ahead of Ukrainian parliamentary elections in March. Yushchenko's bloc faces a strong challenge from the party of Viktor Yanukovych, who lost the bitterly disputed presidential ballot to Yushchenko.

The Russian Foreign Ministry denies that charge, saying Yushchenko's government decided "to use the gas problem ... with the goal of manipulating the internal political situation."

Associated Press

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Source: Commercial Appeal, The

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