Russia cuts gas supply to Ukraine, Europe at risk

Discussion in 'General Discussion' started by Quigley_Sharps, Jan 1, 2006.


  1. Quigley_Sharps

    Quigley_Sharps The Badministrator Administrator Founding Member

    MOSCOW (Reuters) - Russia cut gas supplies to Ukraine on Sunday in a dispute that appeared to hit deliveries to a wintry Europe just as Moscow takes over as chairman of the Group of Eight hoping to showcase its reliability as an energy source.



    The Russian state monopoly, Gazprom, said it had cut supplies to Ukraine by a quarter -- the level of Ukraine's own imports -- after Kiev refused to sign a new contract requiring it to pay four times as much.

    The switch-off already seemed to be making itself felt further west, with deliveries down in Hungary and Poland.

    Western Europe imports 25 percent of its gas from Russia and most of that is delivered by pipelines running across Ukraine. The European union" said it did not expect shortages but was concerned by the standoff.

    Ukraine's Naftogaz energy company accused Russia of brinkmanship that was jeopardizing Europe's supplies. European gas demand is near peak levels because of freezing weather.

    GAS WEAPON

    Though Russia says it is purely a business dispute, the row has fed concern that the Kremlin is prepared to use its vast energy resources as a political weapon.

    Ukraine's Western-leaning president, Viktor Yushchenko, has irked Moscow by trying to take his ex-Soviet state on Russia's western border into NATO and the European union".

    Ukrainian officials say that is why the Kremlin is punishing Ukraine with such a huge price increase while letting more Moscow-friendly ex-Soviet states such as Belarus pay far less.

    Russia took over the annual presidency of the G8 club of industrialized democracies for the first time from Britain on New Year's Day, and its tenure will come under close scrutiny.

    "Russia wants to make energy security its key message to the G8 community, and simultaneously it is becoming a source of danger," said Valery Nesterov, energy analyst at the Troika Dialog brokerage in Moscow.

    French Industry Minister Francois Loos told Reuters Russia had given assurances about its gas exports, and that its G8 presidency meant it would act with a "sense of responsibility."

    BLAME GAME

    Yushchenko stuck to his position that Ukraine was prepared to pay Moscow's asking price, but not immediately.

    "Ukraine is ready to move to a market price from 2006. We do not need loans, we are ready to pay ... But it should not be a virtual price but a real price following the European model," he said after a 3-hour crisis meeting with top officials.

    Moscow wants to raise the price of gas it sells to Ukraine to $230 per 1,000 cubic meters from the current $50 -- a level that reflects Soviet-era subsidized rates.

    Gazprom spokesman Sergei Kupriyanov said enough gas was still being piped via Ukraine to maintain deliveries to other countries, and if they were not getting all their gas, it meant Ukraine was tapping into it.

    Eighty percent of Russian gas exports to western Europe pass through Ukraine.

    "We have information from the ground that shows Ukraine has started illegally siphoning off Russian gas destined for European consumers," Kupriyanov said.

    The chief European importers of Russian gas are Germany, Italy and France, which would have to draw down reserves or seek alternative supplies if there was a major supply disruption.

    Energy ministers of Germany, Italy, France and Austria have made a joint appeal to Moscow and Kiev to ensure a steady flow of gas despite the stand-off. Energy officials from EU member states hold an emergency meeting on January 4.

    Hungary's gas wholesaler MOL said its Russian deliveries via Ukraine had fallen by more than 25 percent, forcing it to order big consumers to switch to oil where possible.

    Poland's supplies were down by 14 percent, but officials hoped to make up for lost pressure from the Ukrainian supply point by increasing the amount gas flowing in from Belarus.

    Homes and businesses in Ukraine were still receiving gas on Sunday thanks to reserves and the country's own modest output. But it was expected shortages would begin to bite within days.

    Officials say Ukraine has enough in reserve to see households through the winter, but are making no comment on the security of supplies to industry.

    Yushchenko, propelled to power in the "Orange Revolution" a year ago, has linked the gas switch-off to the start of campaigning for a parliamentary election on March 26 in which he faces a tough challenge from pro-Moscow parties.

    Ukraine has threatened to retaliate by raising the rent that Russia's navy pays to use the Ukrainian port of Sevastopol as headquarters for its Black Sea fleet.

    (Additional reporting by Anatoly Titkin, Dmitry Zhdannikov and Meg Clothier in Moscow, Olena Horodetska in Kiev, Jeff Mason in Brussels, Mark Heinrich in Vienna and Balazs Koranyi in Budapest)
     
  2. Bear

    Bear Monkey+++ Site Supporter+++ Founding Member Iron Monkey

    This will be interesting to watch....
     
  3. ghostrider

    ghostrider Resident Poltergeist Founding Member

    Yessir, this will probably be the downfall of Gray Davis. He'll try to pay for the increase without raising the rates to the consumer.
     
  4. Quigley_Sharps

    Quigley_Sharps The Badministrator Administrator Founding Member

    Europe, US uneasy after Russia cuts Ukraine gas supply
    MOSCOW (Reuters) - The United States said Russia's halting of gas supplies to Ukraine raised questions about use of energy as a political weapon, and European countries voiced concern their supplies could be hit at the height of winter.

    Russia, taking over the G8 chairmanship for the first time this month aiming to promote itself as a reliable energy source, cut its neighbor's gas supplies on Sunday.

    Moscow said it had no choice but to act after Kiev refused to sign a new contract that would have jacked up prices fourfold, ending the preferential treatment of Soviet days.

    The Kremlin describes the dispute as a purely commercial matter. But Kiev sees an attempt to undermine its pro-Western government and says cutting Ukrainian supplies will undermine deliveries passing through the same pipeline complex to Europe.

    The move appeared to be affecting deliveries to central Europe by early evening, with both Hungary and Poland reporting reduced deliveries.

    Washington stepped into the row, with the State Department saying it regretted Russia's move.

    "Such an abrupt step creates insecurity in the energy sector in the region and raises serious questions about the use of energy to exert political pressure," State Department spokesman Sean McCormack said in a statement.

    "The U.S. has encouraged a compromise solution, and we remain hopeful that a resolution will be reached between the two sides that provides energy security and predictability for all concerned."

    Western Europe, where demand is near peak levels because of freezing weather, imports 25 percent of its gas from Russia, with most of that delivered by pipelines running across Ukraine.

    The Russian state monopoly, Gazprom, said enough gas was still being piped via Ukraine to meet its commitments to other countries. If they were not getting all their gas, it said that meant Ukraine was tapping into it.

    GAS PLEASE

    Hungary's gas wholesaler MOL said its Russian deliveries via Ukraine had fallen by more than 25 percent, forcing it to order big consumers to switch to oil where possible. Poland also said supplies were down by 14 percent.

    Germany's largest gas supplier, E.ON-Ruhrgas, warned there could be problems for big wholesale customers if the dispute dragged on.

    "If the reduction in supplies should prove to be especially large or last for a long time or the winter turns out to be especially cold, then we will hit the limits of our capacities," chief executive Burckhard Bergmann said on Sunday.

    German, Italian, French and Austrian energy ministers have made a joint appeal to Moscow and Kiev to keep gas flows steady and an emergency European union" meeting is due on Wednesday.

    Western-leaning Ukrainian President Viktor Yushchenko is trying to take his state into the EU and NATO. This annoys Moscow, which does not like the idea that its influence over the former Soviet union" might be waning.

    Ukrainian officials say that is why the Kremlin is punishing Ukraine with a huge price increase while giving Moscow-friendly ex-Soviet states such as Belarus a much easier ride.

    Yushchenko, struggling to live up his people's high hopes after the "Orange Revolution" a year ago, says Ukraine is prepared to pay more for its gas -- but will not agree to a big jump all at once. Moscow wants to raise the price to $230 per 1,000 cubic meters from the current $50.

    Ukraine had threatened to retaliate by raising the rent that Russia's navy pays to use the Ukrainian port of Sevastopol as headquarters for its Black Sea fleet.

    It also says it is entitled to skim off 15 percent of gas to cover transit fees, but Gazprom is accusing Ukraine of siphoning off gas destined for Europe illegally.

    Ukraine still has gas thanks to reserves and the country's own modest output and officials say there is enough in store to see households through the winter.

    But they are making no comment on the security of supplies to industry and shortages could begin to bite within days.
     
  5. ghostrider

    ghostrider Resident Poltergeist Founding Member

    OOOHHHH!, Moscow!!! got my communist countries and energy crises mixed up. Sorry, Quig.
     
  6. melbo

    melbo Hunter Gatherer Administrator Founding Member

    LOL, I was wondering about that. Now I see the thought train
     
  7. BRONZ

    BRONZ Monkey+++ Moderator Emeritus Founding Member

    Gas Weapon=OPEC
     
  8. Quigley_Sharps

    Quigley_Sharps The Badministrator Administrator Founding Member

    very true
     
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