/ 9 January 2009

Gazprom expects gas monitoring deal to be signed

Russia’s gas monopoly Gazprom said a deal to monitor gas exports via Ukraine would be signed on Friday, allowing for the resumption of supplies to Europe cut off by Moscow’s price row with Kiev.

”We expect that in the course of today the protocol on the creation of an international independent mechanism to guarantee the transit of Russian gas through Ukraine will be signed,” Interfax quoted Gazprom CEO Alexei Miller as saying.

”And immediately after that we will renew [gas] deliveries.”

The European Commission said a gas monitoring team had started work in Kiev, but Commission President José Manuel Barroso said it would take time to resume shipments, cut off for several days as Europe suffered bitter winter weather.

Czech Prime Minister Mirek Topolanek, whose country holds the European Union presidency, was due to travel to Ukraine on Friday to try to finalise agreement on the monitoring.

Obstacles to a deal remained, and the head of Ukraine’s state-run energy company Naftogaz said talks over the last two days with Gazprom had made no progress.

Naftogaz also said Russia had not given Ukrainian monitors access to gas-pumping stations on Russian territory. Gazprom said Ukraine was refusing to include Gazprom members in the international monitoring team.

Even once the monitors are in place, it could take many hours and possibly days before Russian gas shipped via Ukraine starts reaching Europe again.

Resuming the flows involves building up pressure in the pipeline network, and the large distances involved mean that, once moving, the gas will take time to reach customers.

The gas is likely to be delivered only to Europe, not Ukraine itself, since Moscow and Kiev have yet to agree a price for the gas, subsidised since Soviet times. Russia has repeatedly said Ukraine must now pay the going market rate.

But the presence of monitoring missions at points along the transit routes for Russian gas will reassure Moscow that the gas it is pumping across Ukraine is not being siphoned off by Kiev.

Moscow cited this allegation — denied by Ukraine — as its reason for shutting off gas through its ex-Soviet neighbour earlier this week.

Gas crisis
The nine-day gas crisis has left hundreds of thousands of people in the Balkans without gas, forced factories to shut down and disrupted deliveries as far west as France and Germany, while the continent faced freezing mid-winter temperatures.

The Czech Republic said on Friday it will provide about four million cubic metres of gas per day to its neighbour Slovakia, which declared a state of emergency over its gas supplies earlier this week.

Turkey and Serbia, also hit hard by the gas dispute, were receiving extra shipments from Iran and Hungary.

The dispute between Kiev and its former Soviet master also follows tensions over Ukraine’s efforts to join Nato, a move bitterly opposed by Moscow and viewed with wariness even by European members of the alliance and by investors.

Russian President Dmitry Medvedev said Ukraine must pay a ”normal, balanced, European price” for gas, without discounts. ”That’s how much Europeans pay, and that’s how much the Ukrainians will pay,” Medvedev said on Vesti-24 television.

He said last year Russia sold gas to Ukraine for $179,5 per thousand cubic metres, but Ukrainian consumers paid $320. ”That profit margin went into the pockets of unknown structures, which most likely represent someone’s corrupt interests,” he said.

Ukraine has been beset for months by political squabbling between President Viktor Yushchenko and his former ally, Prime Minister Yulia Tymoshenko, notably over ties with Russia.

Russia cut off gas for Ukraine’s domestic consumption on January 1 in a row over pricing and debts, a dispute Russian Prime Minister Vladimir Putin said was now damaging Russia’s image.

Officials from both sides met EU officials in Brussels on Thursday where the 27-nation bloc sought an end to the spat, which has highlighted its vulnerability to energy supply disruptions.

The European Union receives a quarter of its gas supplies from Russia, 80% of which pass through Ukraine.

Supplies to 18 countries have been disrupted by the dispute. – Reuters