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Ukraine Hit With Gas Cut-Off

By Peter Fedynsky
01 January 2009

Russia has stopped delivery of natural gas to Ukraine after the failure of last minute talks to reach agreement on a price for 2009. Both sides offer assurances that gas will continue to transit from Russia through pipelines in Ukraine to consumers in Western Europe.

Ukraine's Naftohaz gas company confirms the volume of fuel on its end of the pipeline from Russia has been reduced. Gazprom, the Russian state gas monopoly, reduced the flow at 10:00 AM Moscow time at a compressor station in Kursk near the Ukrainian border. Gazprom spokesman Sergei Kupriyanov says talks aimed at signing a delivery contract for the New Year ended late Wednesday without success.

Kupriyanov says the main problem is not the inability to agree on the price of gas, but rather that the Naftohaz delegation at the talks did not have a mandate to sign a new contract.

A press spokesman for Ukrainian President Viktor Yushchenko did not have an immediate comment on the ongoing dispute. However, a statement on the Ukrainian presidential Web site signed by Mr. Yushchenko and Prime Minister Yulia Tymoshenko indicates price remains an issue.

According to the statement, a Russian offer of $250 per 1,000 cubic meter factors in the global drop in oil prices and would give Ukraine a Central European price for natural gas. But the statement claims Russia is seeking to keep a pipeline transit price of $1.70 per 1,000 cubic meters for every 100 kilometers, which would be more than two times lower than the Central European average, and would make adequate pipeline maintenance virtually impossible. Ukraine is proposing a transit fee of no less than $2, and seeks a price of $201 per 1,000 cubic meters. Its price last year was $179.

The official statement says Ukraine has adequate reserves to guarantee that no family will go without heat. Ukrainian leaders also guarantee that transport of Russian gas to Western Europe via Ukrainian pipelines will continue without disruption.

Sergei Kupriyanov says that while the volume of gas has been reduced for Ukrainian consumers by 110 million cubic meters, it has been increased for Western Europe.

The spokesman says export delivery of gas through Ukraine has been increased by about 20 million cubic meters to 326 million every 24 hours.

Kupriyanov told an early afternoon news conference in Moscow that Russia is prepared to sign a new contract with Ukraine at any time. Soon after he spoke, a spokesman for the Ukrainian president said members of the administration were in a meeting to discuss the gas issue.