Sunday, January 4, 2009

A natural gas dispute between Russia and Ukraine escalated Tuesday when Ukraine accused the Russian supplier of blocking pipelines to Europe, and three European countries said their supply from Russia had been cut or reduced.

Ukraine's state-run gas company said Gazprom, the Russian energy giant, had reduced the amount of natural gas flowing through Ukraine to nine mostly Eastern European countries.

Gazprom said Ukraine was to blame. At a news conference Tuesday in London, Gazprom said Ukraine shut off three pipelines early Tuesday, thus reducing the flow of gas sevenfold.

"Ukraine is in obvious breach of obligations as a transit country," Gazprom's deputy chief executive, Alexander Medvedev, said.

It is the latest twist in an ongoing dispute between Gazprom and Ukraine's Naftogaz Ukrainy, which normally receives natural gas from Russia. Gazprom shut Ukraine's gas supply last week after saying Naftogaz had failed to pay for past deliveries

Ukraine denies owing the money and is currently meeting its domestic needs with supplies from storage facilities.

Bulgaria, Romania, and Turkey told CNN on Tuesday that their supplies of Russian natural gas had been affected.

A spokesman from Bulgaria's Ministry of Economy and Energy told CNN the supply was halted because of the Russia-Ukraine dispute. And a spokesman for Romania's Economic Ministry told CNN it had suffered a 75-percent reduction "as a direct result of the dispute."

A Turkish Energy Ministry spokesman told CNN that Russian gas supplied to Turkey through Ukraine had been completely cut. The country was raising supplies of gas from another pipeline in order to compensate, he said.

While Gazprom has reassured its European customers that their supplies will not be affected by the dispute, it does accuse Ukraine of siphoning off European gas as it flows through Ukraine.

Gazprom's deputy chief executive, Alexander Medvedev, told journalists in Paris that Ukraine is stealing 50 million cubic meters of gas and withholding supplies to Hungary, Poland, and Romania.

Medvedev said Gazprom plans to file suit in the coming days to stop the alleged practice.

Ukraine's Naftogaz said Tuesday that Gazprom was reducing the gas supply to Moldova, Bulgaria, Romania, Greece, Turkey, Poland, Hungary, Slovakia, and Germany.

Gazprom shut off Ukraine's gas supply on Thursday after saying it had missed $2 billion in payments. It acknowledged that Ukraine may have paid part of that amount, but said that still leaves Kiev $614 million in debt. Ukraine denied owing the money and is currently meeting its domestic needs with supplies from storage facilities.

Gazprom had reassured Europe that its natural gas supply, which runs through Ukraine, would not be affected by the dispute with Kiev. However, analysts are concerned that if the two sides fail to strike a deal more supplies will be cut in the next two weeks.
Russia is the world's biggest producer of natural gas and supplies Europe with more than 40 percent of its imports -- mainly via the pipelines through Ukraine

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