EU tries to stay neutral as Russia reduces gas flow to Ukraine

PARIS -- As Russia put the latest tightening twist on the gas valve to Ukraine on Monday, Europe steadfastly refused to become the arbiter in a price dispute in which both sides have weaker hands than in a similar standoff three years ago.
Ny Tid
Publisert: 06.01.2009

Five days after Gazprom, the Russian natural gas monopoly, cut supplies to Ukraine, it announced that it would go further and reduce the flow of gas to the EU via Ukraine by 65.3 million cubic meters a day, the same amount that it accuses Kiev of having siphoned off.

The announcement could cause gas shortages in Europe, where several countries have already had to tap their reserves, officials said Monday.

Indeed, Prime Minister Vladimir Putin of Russia noted in a televised address Monday, that “our Western European customers will not receive the gas in their contracts.”

Aleksei Miller, the chief executive of Gazprom, agreed that European countries would not receive gas “Ukraine had stolen” but pledged to try to increase exports via Turkey and Belarus and withdraw more gas from reserves in Europe, he said.

The crisis is the latest test of EU resolve to speak to Moscow with one voice, especially after the Czech Republic took over the bloc’s rotating presidency from France this month.

In 2006, a similar dispute prompted the EU to side with Kiev. This time the bloc has urged for a swift end to the crisis, but it has so far refused to get involved as an intermediary.

Amid competing charm offensives by Russian gas executives and Ukrainian officials touring the Continent to win EU support, officials insisted that the issue was a “commercial dispute” that had to be dealt with bilaterally.

“It has to be resolved by the two parties,” Ferran Tarradellas Espuny, an energy spokesman for the European Commission in Brussels, said Monday.

The price dispute has its roots in the collapse of the Soviet Union, leaving Russia with the gas wells and Ukraine with the pipelines to Europe.

Gazprom wants Ukraine, which relies on Russia for 70 percent of its own gas needs, to pay $450 per 1,000 cubic meters, a sum similar to that currently paid by EU countries and more than twice the subsidized rate that applied last year. But Ukrainian officials say the country’s control of pipelines entitles it either to subsidized prices or higher transit fees.

Aleksandr Medvedev, a deputy chief executive of Gazprom and the brother of President Dmitri Medvedev, said in Paris on Monday that it was “high time” Europe got involved. He accused Kiev of blackmail and “stealing” gas.

“We will not allow ourselves to be blackmailed,” Medvedev said at a news conference. “What we expect from the EU is the proper judgment.”

His trip followed a string of visits by Ukrainian officials, including Energy Minister Yuriy Prodan, who say that Ukraine withdraws only enough gas to operate compressor stations along the pipeline route, needed to keep the gas flowing.

Negotiations broke down Dec. 31 but on Monday the state-run Ukrainian energy company, Naftogaz, said that talks with Gazprom would resume “in coming days.”

The EU has a clear stake in the standoff being solved swiftly. The bloc depends on Russia for a quarter of its gas, 80 percent of which is shipped through Ukraine.

Bulgaria, Romania, the Czech Republic and Hungary all said supplies were down, news agencies reported Monday.

But the case for taking sides has become weaker, officials say.

Russia faces falling energy prices. In Ukraine, acute economic woes are compounding a political crisis that has left many in the West disillusioned. If Kiev paid the gas price Moscow is demanding, it would cost the country about $16 billion, the same as an emergency loan recently agreed to by the International Monetary Fund to help stabilize its faltering economy.

(James Kanter contributed reporting from Brussels, and Andrew E. Kramer from Moscow.)