Europe feels heat from gas stand-off

By Isabel Gorst in Moscow, Chris Bryant in Berlin, Roman Olearchyk in Kiev and Jan Cienski in Warsaw

Published: January 4 2009 14:30 | Last updated: January 4 2009 20:31

Russia and Ukraine traded insults at the weekend as a gas stand-off between the two countries entered a fifth day, causing gas shortages to ripple west into Europe.

Poland reported an 11 per cent drop in Russian gas deliveries through Ukraine on Sunday and appeared to be the worst-hit by the dispute. The Czech Republic, Bulgaria, Romania and Turkey are also affected.

In an escalation of tensions, Gazprom said it would sue Ukraine in the international arbitration court in Stockholm for stealing gas and reneging on a long-term gas transit contract signed in 2002.

Russia embargoed gas supplies to Ukraine on January 1 after talks on a deal for this year collapsed, echoing a dispute in 2006 when gas shortages were felt deeply in Europe.

Both sides have guaranteed to maintain deliveries to Europe which relies on Russian gas via Ukrainian pipelines to meet one fifth of its demand.

However, Naftogaz, Ukraine’s state gas company, warned that it would face technical problems delivering gas to Europe within a fortnight unless Gazprom resumed supplies.

Gazprom said its ability to compensate for gas shortfalls in Europe with supplies through non-Ukrainian pipelines was “not unlimited”.

PGNiG , the Polish oil and gas company, said it was relying on Russian gas delivered through Belarus to compensate for the shortfall through the transit pipeline from Ukraine.

Naftogaz said transit terms for 2009 had not yet been agreed and accused Gazprom of cutting supplies to Europe to blacken its name.

Alexander Medvedev, the deputy chief executive of Gazprom, said the Naftogaz claim was a “direct lie”.

“The contract is black and white, signed and stamped,” he told reporters in Berlin.

Legal experts could not verify the rival claims because Russian-Ukrainian gas contracts are secret.

Mr Medvedev embarked on a whirlwind tour of Europe at the weekend to drum up support. He urged the European Union to put pressure on Ukraine to honour its transit obligations as a signatory to the European energy charter.

The EU has refused to mediate in what it sees as a commercial dispute between two companies, but has called a meeting of its 27-member states on Monday to co-ordinate a response.

The chances of an early truce appeared to recede on Sunday when Gazprom accused Ukraine of blocking talks and said it would charge $450 per 1,000 cubic metres for gas this year, double the Naftogaz offer.

Naftogaz said it would resume negotiations if Gazprom proposed a “reasonable” price. “What kind of talks can there be with a price of $450?” asked Valentyn Zemlyansky, a Naftogaz spokesperson. “Why not $500; why not $600?”