Russia gas row disruption spreads, no talks in sight

Russian gas flows to four European Union countries were below normal levels on Saturday after Moscow cut off supplies to Ukraine in a pricing dispute, and there were no talks in sight to resolve the dispute.

With temperatures below zero overnight in Europe, Bulgaria’s Bulgargaz operator joined energy firms in Poland, Romania and Hungary in saying they had noted falls in supply, though flows to Europe’s biggest economy, Germany, were not affected.

The European Union, which gets a fifth of its gas from pipelines that cross Ukraine, said it would call a crisis meeting of envoys in Brussels on Monday and demanded that transit and supply contracts be honoured.

Three years after a similar dispute briefly disrupted supplies, European fears of gas flows dropping off in the dead of winter were once again becoming a reality — and Russia’s reputation as a reliable gas supplier was under new scrutiny.

Russia halted all supplies to Ukraine on January 1 in what it called a purely commercial dispute, but in the background is a fierce disagreement over a drive by Kiev’s pro-Western leaders to join Nato.

Europe has enough gas stockpiled to manage without Russian supplies for several days. It could face difficulties should problems last for weeks, especially if cold weather drives up demand, analysts said.

Signalling that a way out of the gas row was still some way off, Russia’s gas export monopoly Gazprom said Kiev was not ready to resume negotiations.

”They are not negotiating because there is nobody to negotiate. It looks like they are not thinking about their own country, just playing political games,” Gazprom deputy CEO Alexander Medvedev said after talks with officials in the Czech Republic, holder of the EU’s rotating presidency.

EU intervention
In a separate interview with Reuters, Medvedev said volumes going to Poland, Hungary and Romania had fallen because Ukraine was blocking exports by gas trade intermediary RosUkrEnergo, in which Gazprom owns a 50% stake.

”That is why Poland, Hungary and Romania are suffering,” he said by telephone from Prague.

”Europe must be interested in helping to solve the dispute as quickly as possible … What we need from the EU is their help to persuade Ukraine to follow the rules of behaviour at the negotiating table,” he said.

Ukrainian state energy firm Naftogaz blamed Gazprom for the shortfalls in European supplies, saying Russia had reduced the volumes it was pumping to Europe.

”The company thinks that Gazprom’s position breaches international practices of holding negotiations … and amounts to energy blackmail,” it said in a statement.

In Sofia, Bulgargaz CEO Dimitar Gogov said supply levels had not fallen below a critical level but further reductions could force the company to introduce restrictions for customers.

”The pipeline pressure has dropped and we are getting smaller deliveries as of Saturday morning,” Gotov told Reuters.

Russia’s 2006 dispute with Ukraine prompted calls for the EU to reduce its reliance on Russian gas but Gazprom forecasts that the bloc will rely on Russia for as much as one-third of its gas by 2015, up from about a quarter now.

Alexei Miller, CEO of Gazprom, said on Thursday he wanted Ukraine to pay $418 per 1 000 cubic metres (tcm) of gas, compared with the $179,50 Kiev paid in 2008.

European customers pay about $500, though that price is set to drop in line with the falling price of crude.

Ukraine, facing a deep recession, says it can ill afford to pay higher prices for its gas.

Ukrainians on the street in Kiev seemed to blame their own politicians for failing to reach a deal with Russia.

”This is just bandits sitting in the Kremlin arguing, deciding, talking to bandits sitting in Grushevska street,” said Oleg Karlichyk, a plumber in his mid-30s on his way to work, referring to the seats of power in Moscow and Kiev. – Reuters

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