Russia Cuts Off Ukraine's Gas Supply

Stalemate Over Kiev's Debt And Prices For 2009 Prompt Cutoff, Worries For Europe

(AP)  Russian gas monopoly Gazprom said it cut all gas supplies to Ukraine on Thursday morning after talks broke down over payments for past shipments and a price for 2009.

Gazprom spokesman Igor Volobuyev said the cuts began as planned at 10 a.m. (0700GMT and 2 a.m. EST) Thursday.

A spokesman for Ukrainian gas company Naftogaz confirmed a steady drop in supplies.

There are fears that a cutoff could lead to a repetition of a January 2006 gas crisis. Then, a similar dispute between Russia and Ukraine briefly interrupted gas shipments to many European countries. Ukraine controls the pipelines through which Russia supplies most of its customers in Europe.

While cutting gas to Ukraine, Gazprom said it also has increased the gas pumped through pipelines that mainly serve Europe, which gets about a quarter of its gas from Russia.

Russian Prime Minister Vladimir Putin has warned Ukraine against diverting gas intended for other customers, saying that could have "quite serious consequences for the transit country itself" by damaging relations with Europe.

Ukraine's president and prime minister issued a statement saying they would guarantee the uninterrupted transit of natural gas through Ukrainian territory to Europe.

Natural gas is used for heating and to generate electricity, and the cutoff comes as Europe approaches the depths of winter. Naftogaz director Oleh Dubina has said that Ukraine has enough gas in reserve to last it through early April.

The deadlock over gas supplies reflects the deep political split between Moscow and Kiev.

Ukrainian President Viktor Yushchenko has angered the Kremlin through his efforts to build ties to Western Europe and his support of Georgia in its August war with Russia.

Ukraine's position in the dispute is further complicated by divisions in the country's leadership. Yushchenko and Prime Minister Yulia Tymoshenko, bitter political rivals, are at odds over gas policy and relations with Russia, among other issues.

Gazprom had warned it would cut gas supplies unless Ukraine paid off all of a $2.1 billion debt and signed a deal setting prices for 2009 deliveries by midnight. Neither was done.

Naftogaz paid $1.5 billion to the Swiss-based gas trader Rosukrenergo, which it says covers the debt. But Gazprom CEO Alexei Miller said late Wednesday that Gazprom had not yet received the money. Gazprom claims Ukraine owes $600 million more in fines for late payment.

Rosukrenergo is half owned by Gazprom. It was not immediately clear why the money had not been transferred to Gazprom.

"This is an issue of Gazprom's dealings with Rosukrenergo," Naftogaz spokesman Valentyn Zemlyansky said. "Naftogaz has fulfilled all its obligations."

The other stumbling block was the failure to sign a contract for 2009 gas deliveries.

Gazprom had first insisted that Ukraine pay $418 per 1,000 cubic meters of gas in 2009, more than double the $179.5 it paid the previous year.

On Wednesday, Gazprom offered a contract with gas set at $250, which Ukrainian officials said was still too high.

Yushchenko and Tymoshenko offered early Thursday to pay Russia $201 per 1,000 cubic meters of gas if Russia agrees to pay $2 per 1,000 cubic meters per 60 miles in future transit fees for use of Ukraine's pipeline network.

Russia has said the $250 offer is contingent on the current transit fee of $1.70 remaining unchanged.

While Gazprom's European customers now pay more than $400, the cost of gas is expected to fall sharply in the spring as a result of the steep drop in the price of oil.

[ndjam]

Gazprom owns Europe right now. Gazprom is the largest supplier of natural gas in the world and the only supplier to Europe right now. If anyone messes with Russia in that region, they will shut off all gas exports and freeze and starve them out. Russia can take over all of Europe without any use of military force if they wanted. All this can happen because of Europes over dependence from Russia''s Gazprom.

[antoniof123]

Ukraine should become part of NATO.
Posted by smurfcrusher at 03:55 PM : Jan 01, 2009

It will not do them any good they need oil not nonsense. Oil keeps their homes warm if we continue down this path the world will break down.

[spinproof]

Many people familiar with Russia and how Russia conducts business predicted Russia would do something like this and in the case of War Russia would even act worst! The EU is stupid for relying on Russia for its energy needs and I''m sure many in the EU are worried and those who supported being dependent on Russian energy have a smacked a s s look on their faces right now! lol

[nincomp]

Russia stops fuel deliveries in the dead of winter . What a discusting thing to do to millions of people who depend on the gas for heat . As I have said before , Russia is a TERRORIST Country and should NOT be delt with in any way until they stop holding thier services and products for ransom . A country full of inhumane cold hearted waste .

Posted by wolf563 at 08:15 AM : Jan 01, 2009
+
This is what happens when one country completely depends on the other for all its supplies. Palestinians are in a similar situation since all their supplies have to come in via Israeli ports that can be closed at Israel''s whim.

[mikefl11]

This is a commercial transaction and Gazprom should be paid the market price (not a subsidized price) for its product. Independence comes at a price and it is called responsibility. The Ukraine should now pay its bill in full and get about the business of building its own independent economy. These are the types of difficult financial situations in which some US/European support can be very effective to encourage independence (and free market economies).

[rudy6543]

The Russian Mafia now controls much of Russia and the petroleum production. Russia needs to be cut off completely. No petroleum coming out. Do it now before summer comes.

[smurfcrusher]

Ukraine should become part of NATO.

[pvperson]

"Russia stops fuel deliveries in the dead of winter"....well, that is when the old contract ended. .

Ukraine pays $179.5 per 1000 cubic feet.
European customers now pay more than $400.
Russia want Ukraine to pay $250 (almost half of what Europeans pay).

Why should Russia be forced to "give" the gas away.

[tawpdawg111]

brrrrrrrrrrrrrr!

[nothappyatall]

What did they do BEFORE this gas line was put in? this gas thing was not around 50 years ago or 100 years ago, either pay up, or find an alternative.

[runningralph]

This is bare knuckled capitalism. Gazprom is putting the squeeze on the Ukriane. The Ukraine should look for other sources and get extremely conservative. The Ukraine should raise the rent on the pipeline right of way. Gazprom will cave.

[missingamerica]

Ukranians will have to start burning American $20 bills to keep warm....that''s less expensive than Russian gas anyway....

Posted by earache4 at 07:48 AM : Jan 01, 2009

Say what? We have the manufacturing base and service sector to back up our money!

Oh, wait...

[scottyusa]

Cutting off fuel supplies in winter is pretty heartless. Russia has also used its fuel as leverage with Europe. I think the Eruropeans and Americans should triple the cost of food it sells to Russia. That would be a good indication to the Kremlin that the world will not put up with this sort of blackmail.

[wolf563]

morphndol8 : Your coded messages are to easy to read . Take a few more hits off that crack pipe and try again .

[wolf563]

Russia stops fuel deliveries in the dead of winter . What a discusting thing to do to millions of people who depend on the gas for heat . As I have said before , Russia is a TERRORIST Country and should NOT be delt with in any way until they stop holding thier services and products for ransom . A country full of inhumane cold hearted waste .

[tincup356]

sounds like Russia has been taking lessons from the greed misters of America.