Ukraine: Natural Gas Shortages Possible

By: AP
By: AP

KIEV, Ukraine – A top Ukrainian official has warned that European customers could see serious natural gas disruptions in about two weeks if the energy dispute between Russia and Ukraine is not resolved, and the Russian gas monopoly Gazprom accused Ukraine of boycotting contract negotiations.

As Russia and Ukraine traded accusations in their bitter dispute over energy prices on Saturday, four European nations — Romania, Hungary, Poland and Bulgaria — all reported some supply drops in natural gas Saturday.

Gazprom cut off gas shipments to Ukraine on Thursday. Then Gazprom and Ukraine embarked on dueling charm offensives, both trying to assure western European nations that they were reliable energy partners and the fault lay with their rival.

The Russian delegation hoped to convince investors in Prague, Paris, Berlin and London that Kiev is to blame for any gas shortages, saying Ukraine is siphoning off natural gas from Russian shipments, as well as refusing to pay $600 million in fines or negotiate a new price contract for 2009.

Russia supplies Ukraine with natural gas and also sends 80 percent of its gas supplies to Europe through pipelines in Ukraine. The stakes in the dispute are high because Europe relies on Russia for a quarter of its gas needs — and because heat is crucial in the biting northern European winter.

Meanwhile, Bohdan Sokolovsky, an economic aide to Ukrainian President Viktor Yushchenko, warned that serious disruptions could hit Russia's European customers, if Russia continues to refuse to ship gas allocated for Ukraine to Ukraine. Sokolovsky said even though Ukraine continued to pump Russian gas destined for Europe, European countries could see major shortfalls in 10 to 15 days.

Without Ukraine's share of gas in the shipment from Russia, the overall gas levels in the pipeline transit system begin to fall. Sokolovsky said if that continues, an automatic shutdown will be triggered because the system requires a minimum amount of gas to maintain pipeline pressure.

"It is obvious that this is political pressure on Ukraine," Sokolovsky said of Russia's gas cutoff. "This is pure politics."

Speaking in Prague on Saturday, Gazprom Deputy Chairman Alexander Medvedev said Ukraine's position was "absolutely unacceptable."

"We're not negotiating. There's nobody from Naftogaz to negotiate" with, he said, referring to Ukraine's state gas company.

Despite the gas cutoff to Ukraine, Gazprom says it has continued pumping the gas meant for Europe. Medvedev said Gazprom has been using alternative routes that don't cross Ukraine — pipelines in Belarus and Turkey — but those don't have the capacity to make up the shortfall. As a result, some European countries were seeing a reduction in supplies.

"We try to do our utmost to compensate for what Ukraine is doing ... but the capacity to compensate has its limits," Medvedev said.

Gazprom Alexei Miller later suggested at a televised company meeting in Moscow that European consumers should sue Ukraine for allegedly stealing their gas.

Ukraine, meanwhile, disputes the fines and contends that Gazprom is unfairly refusing to accept a rise in transit fees while asking for higher gas prices for 2009.

Gazprom CEO Alexei Miller said in a statement late Saturday that the company would file a lawsuit with the Court of Arbitration in Stockholm, Sweden, against Naftogaz over the transit issue.

The two nations also are at odds over the price Ukraine will pay for natural gas in 2009. Gazprom has proposed a price jump from $179.50 to $418 per thousand cubic meters.

Valentyn Zemlyansky, a Naftogaz spokesman, said Saturday the company is ready to negotiate in Moscow but called Gazprom's behavior "energy blackmail." He rejected the claim that Ukraine was siphoning gas, saying the country had been sacrificing its own reserves to maintain minimum pressure levels in the pipes.

Zemlyansky said by noon Friday, Naftogaz had received a request from Gazprom to pump 305 million cubic meters, but it had to pump 319.3 million cubic meters just to keep the gas flowing.

"Ukraine is fulfilling all the obligations of the energy charter, in comparison to our Russian partners," Zemlyansky told The Associated Press.

Ukraine itself has enough reserves to last until early April, Naftogaz says.

Outside observers said the ramifications of gas shortages across Europe were so great that they should not be allowed to occur. Chris Weafer, chief strategist at Uralsib bank, said the dispute was mainly political and would likely be resolved to avoid serious disruptions to both Russia's and Ukraine's reputations.

The European Union has urged the two former Soviet republics to find an "urgent solution" to the dispute and announced it will host a Jan. 9 meeting with Russian and Ukrainian experts to discuss natural gas shipments to the 27-nation bloc.

Still, the EU warned it would not play mediator.

"We reject being part of the dispute," Czech Deputy Prime Minister Alexandr Vondra said Saturday. The Czech Republic holds the bloc's rotating presidency.


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