No compromise on Russian gas cutoff to Ukraine

[December 24, 2008]  MOSCOW (AP) -- Russia and Ukraine have failed to reach agreement on a $2 billion debt for gas imports, a Russian official said Wednesday as a New Year's deadline for a gas cutoff loomed.

Ukrainian officials arrived in Moscow for a fresh round of negotiations watched with particular concern by European nations because they rely on Russia for a quarter of their imported gas -- and Ukraine is the chief transit country.

Russia's state-controlled gas giant Gazprom has threatened to turn off the taps to the former Soviet state on Jan. 1 if the neighbor fails to pay off the entire debt.

Observers say that is a tough target: Ukraine, devastated by the financial crisis, is relying on a $16.4 billion emergency loan from the International Monetary Fund to mitigate a meltdown as it buckles under a halving of exports and a sharp devaluation of the national currency.

Ukrainian President Viktor Yushchenko said Wednesday that the sides had agreed to postpone the debt repayment until early next year. He has also suggested that Ukraine could return the gas it cannot pay for either to Gazprom or some other entity.

But Gazprom spokesman Sergei Kupriyanov denied that an agreement had been reached. "The question has not been solved as was announced in Kiev," Kupriyanov said in televised comments.

In a sign the cutoff could materialize, Ukraine's state gas company Naftogaz said in statement late Tuesday that Ukraine had enough gas in its underground storage facilities to last until the end of the heating season, which officials said is usually in early April.

Yushchenko reiterated Wednesday that Ukraine would continue shipping Russian gas westwards and that half of the gas reserves are intended for European consumers.

Russian Energy Minister Sergei Shmatko has urged European countries to put pressure on Kiev to avoid a repeat of the 2006 gas war between the two former Soviet states. Then, Ukraine was left without gas for several days and shortages were reported in Eastern Europe.

Despite Ukrainian guarantees of uninterrupted gas transit, the conflict risks escalating into a repeat of the 2006 gas war between the two countries in which Ukraine was left without the fuel for several days, leading to supply reductions in eastern Europe.

The other transit country for Russian gas to Europe is Belarus.

[Associated Press; By MARIA DANILOVA]

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