Russia stops all gas supply to Europe via Ukraine

[January 07, 2009]  KIEV, Ukraine (AP) -- Russia has shut off all its gas supplies to Europe through Ukraine -- the latest move in a pricing dispute that has reduced or halted fuel deliveries to a dozen countries during a winter cold snap.

Russia's gas monopoly Gazprom, which had sharply limited supplies through Ukraine on Tuesday, has stopped all gas shipments through the country as of 7:44 a.m. (0544 GMT), said Valentyn Zemlyansky, spokesman for Ukraine's Naftogaz.

About 80 percent of Russian gas to Europe is shipped via Ukraine. Other smaller pipelines run through Belarus and Turkey.

"It was the Russian side's decision to stop all gas deliveries to Europe" through Ukraine, Naftogaz head Oleh Dubina told reporters. "I think it is inappropriate."

Russia confirmed the cutoff, but said it was Ukraine's fault because it had shut down the last pipeline carrying gas from Russia. Gazprom also says it is reducing to compensate for the gas it accuses Ukraine of diverting.

The Russia-Ukraine natural gas dispute has left tens of thousands of people in Europe without heat as governments scrambled to find alternative energy sources.

By early Wednesday, Bulgaria, Greece, Macedonia, Romania, Croatia, Serbia and Turkey had all reported a halt in gas shipments, while France, Germany, Austria, Poland and Hungary had reported substantial drops in supplies from Russia.

In the Czech republic, gas operator RWE Transgas confirmed Wednesday that Russian gas deliveries through Ukraine stopped completely overnight. The country still receives gas from another route from Norway and customers were not immediately affected, the company said.

Romania, which imports about 30 percent of its gas from Russia, said its president has called Russian prime minister Vladimir Putin to discuss the issue and that its government is holding an emergency meeting with producers and distributors.

Russia stopped all gas shipments to Ukraine on Jan. 1 after both countries failed to agree on prices and transit fees for next year.

Over the past week, Russia accused Ukraine of siphoning off tens of millions of cubic meters of gas meant for Europe from its transit pipelines.

Ukraine admitted diverting some transit gas, saying it had the right to use the fuel to run its pumping system. Gazprom then started dramatically reducing supplies to European consumers this week.

The crisis erupted after Russia and Ukraine failed to agree on a gas price for 2009 and on payment of $600 million Gazprom says it is due from Naftogaz.

In 2008, Russia charged Ukraine about half what it charged its European customers for gas. The subsidy is a legacy of the Soviet era, when both countries were part of the U.S.S.R.

Gazprom has long sought to charge Ukraine European-level prices. Ukraine says that if it pays more for gas, Russia should pay more for shipping gas through Ukraine.

Neither side has met for talks since negotiations broke down before midnight on Dec. 31, and each side has blamed the other for the breakdown.

The cut-off came after Gazprom and Ukraine's Naftogaz agreed to resume face-to-face talks and the head of Naftogaz said he would fly to Moscow on Thursday. Dubina, the Naftogaz head, said Wednesday the meeting was still on and that the two sides were looking for a solution to the crisis.

Russia has expressed frustration with the absence of negotiations, and said it is ready to resume talks anytime.

Ukraine may be in the stronger negotiating position.

The country had about 16 billion cubic meters of gas in its vast underground storage system Tuesday.

With Ukraine consumers using about 200 million cubic meters a day, and Ukraine producing some of its own gas, the country should not see shortages until early April, the government says.

Gazprom, meanwhile, is losing substantial income during a peak season for gas consumption. On a typical winter day, experts say, Gazprom would be pumping about 350 million cubic meters of gas to Europe. It also will soon see an excess of gas in its system that it will have to deal with.

Russia is diverting some of its gas exports around Ukraine, through Turkey and Belarus. But Gazprom relies on Ukraine's vast pipeline network to deliver the bulk of those exports.

The cut-off comes on Orthodox Christmas, celebrated in Russia, Ukraine and a number of other Orthodox Christian countries in Europe.

[Associated Press; By MARIA DANILOVA]

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