Gas chiefs for Ukraine, Russia hold urgent talks

15:55, 08 January 2009
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To try to resolve a bitter dispute

The natural gas chiefs for Russia and Ukraine met twice in the last 24 hours Thursday to try to resolve a bitter dispute that halted energy supplies to Europe, while outrage swelled across the continent as factories closed, schools shut down and hundreds of thousands faced winter without heat.

The meetings between Gazprom`s Alexei Miller and Naftogaz`s Oleh Dubina were their first since negotiations broke down on New Year`s Eve over natural gas prices for 2009 and Ukraine`s energy debt.

Natural gas supplies from Russia through Ukraine to Europe remained cut off for a second day, leaving more than a dozen countries scrambling to secure alternative energy sources.

"The heads of Naftogaz and Gazprom are talking now" in Brussels, said Jacek Saryusz-Wolski, the head of the European Parliament`s foreign affairs committee. The two chiefs also held a surprise meeting in Moscow early Thursday, but no breakthrough was announced.

Gazprom stopped all gas shipments to Ukraine on Jan. 1 but kept supplies flowing to Europe through Ukraine`s pipelines until Wednesday, when all deliveries stopped.

EU Commission President Jose Manuel Barroso has pressed both nations` prime ministers for a quick resolution to the standoff.

"If this matter is not solved, it will raise very serious doubts about the reliability of Russia as a supplier of gas to Europe and Ukraine as a transit country," he said.

Europe depends on Russia for one-quarter of its natural gas, and about 80 percent of that is shipped through pipelines crossing Ukraine. Other smaller pipelines run through Belarus and Turkey.

Austria, Bulgaria, Croatia, the Czech Republic, France, Greece, Hungary, Italy, Macedonia, Romania, Serbia, Slovakia, Slovenia and Turkey all reported a halt in Russian gas shipments by Wednesday. Germany and Poland reported substantial drops in supplies.

Barroso said Ukraine and Russia both agreed to accept international monitors that could verify the flow of gas. Russia has accused Ukraine of siphoning off gas meant for European customers, while Ukraine claims Russia is not sending enough gas to pump the rest of it west to Europe.

Ukrainian officials at the European Parliament claimed the higher prices being demanded by Russia were an attempt to cripple Naftogaz and the Ukrainian economy during the global financial crisis. But Naftogaz` Dubina was calmer, saying the dispute was commercial.

"I see no hidden politics. I can see purely economic differences between Gazprom and Naftogaz," he said in Brussels.

Dubina said Naftogaz would need around 36 hours to restore supplies and was ready to start transporting gas immediately if the two companies set a 10-day deadline to thrash out their problems.

The first gas supplies would be piped to Bulgaria, he said, where shortages have shuttered major factories and left cities shivering.

Angry Bulgarians protested in front of the Ukrainian embassy in Sofia on Thursday, holding signs reading "We are not hostages" and accusing Russia and Ukraine of being "gas terrorists."

Orthodox priests fired up wood-burning stoves in Bulgaria to keep their churches warm, while residents of the capital blew on their hands as they rode unheated trams.

Hungary, also facing shortages that closed major factories, said it will sell up to 2 million cubic meters of natural gas Thursday to Serbia, where the situation is even worse.

In Bosnia, which does not have any gas reserves, woodcutters braved below-freezing temperatures as people turned to their fireplaces or stoves for heat.

Russia is demanding that Ukraine pay significantly more for its gas. Last year, Russia charged Ukraine $179.50 per 1,000 cubic meters, about half what it charged its European customers.

Russia`s last offer before talks broke down was $250, but President Dmitry Medvedev said Moscow will now insist that Kiev pay European prices "without a discount."

Naftogaz deputy chief Volodymyr Trikolich said Thursday his company continues to insist on a price of $201 per 1,000 cubic meters and wants to raise the transit fee Russia pays to use Ukraine`s pipelines from $1.70 to $2 per 100 kilometers.

Medvedev also demanded full payment of Ukraine`s $600 million alleged debt to Gazprom, which Ukraine has said it will not pay until the issue is settled in arbitration courts.

Czech Deputy Foreign Minister Alexandr Vondra, whose country holds the EU presidency, ruled out the possibility of EU countries paying any of Ukraine`s debt.

"I don`t think that is what we need to do," Vondra told reporters in Thursday in Prague.

Ukraine, which has a vast underground storage system full of natural gas, says it can weather the dispute until early April. But Kiev, the Ukrainian capital, was experiencing heating problems Thursday, with residents forced to bundle in winter clothes and turn on electric heaters to keep warm.

Gazprom, meanwhile, is losing substantial income during a peak season for gas consumption and during a global economic crisis in which its share price has plummeted.


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