Russia promises to restore Europe's gas supply

Russia moved to protect its international reputation yesterday and promised to restore full gas supplies to Europe by this evening after they were badly disrupted by a rancorous price dispute with neighbouring Ukraine.

Gazprom, Russia's state gas monopoly, cut supplies to Ukraine on 1 January after the two sides failed to sign a contract for 2006, and the company has become embroiled in an emotional war of words that shows no sign of ending. Since many of the pipelines that carry Russian gas to countries such as Germany and Italy run through Ukraine, Europe has been badly affected by the dispute.

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Energy companies in Hungary, Austria, Slovakia, Romania, Poland and Croatia reported a decline in the amount of gas they were receiving yesterday with many companies saying their supply was up to 40 per cent lower than usual.

Russia and Ukraine disagree about exactly why Europe has been affected by what should be a bilateral dispute. Gazprom said it had documentary proof that Ukraine had started stealing gas earmarked for European consumers and claimed that Kiev illegally siphoned off gas worth more than $25m (£14.5m) on Sunday alone. Moscow said that was why Europe was suffering.

Kiev firmly rejected those accusations and insisted it was using gas it had kept in reserve plus supplies from the central Asian country of Turkmenistan. But it did not rule out the possibility that it would dip into Russia's exports if the temperature dropped below zero.

Under fire from some of its most valued customers and aware that its international reputation was on the line, Gazprom said last night that it would take urgent measures to ensure Europe's supply was fully restored by this evening.

The company said it would pump nearly 100 million extra cubic metres of gas through Ukraine's pipeline system per day to make good the shortfall. But Gazprom insisted the extra gas was not for Ukraine. "With the aim of preventing a possible energy crisis caused by Ukraine illegally taking gas, Gazprom has taken the decision to deliver additional gas," the company said in a statement. "We stress that the additional delivery of gas is not designed for Ukrainian consumers."

Russia wants Ukraine to start paying what it considers to be the market rate for its natural gas, $230 per 1,000 cubic metres up from $50 last year, but Ukraine has refused.

Ukraine's President, Viktor Yushchenko, who came to power through the so-called orange revolution at the end of 2004, said Russia was trying to bully its smaller neighbour for political reasons. He has called the row "a battle for independence" and has predicted it will be much more difficult to win than the revolution which propelled him to the Ukrainian presidency.

Kiev believes Moscow is trying to blackmail Ukraine to ruin its economy ahead of crunch parliamentary elections in March to give pro-Russian politicians a better chance of victory. Mr Yushchenko claims that other former Soviet states pay far less for their gas than the west European norm of $240 and argues that any Russian increases should be gradual and proportional.

Moldova, a former Soviet state, also complained yesterday that it was being bullied by Russia. It said its gas supply had been all but switched off after it failed to agree to a 100 per cent price hike. Reckoned to be the poorest country in Europe, Moldova paid $80 per 1,000 cubic metres last year but is under pressure to pay $160 this year.

Moldova's President, Vladimir Voronin, who like Mr Yushchenko has portrayed himself as a friend of the West rather than a friend of Russia, spoke to his Ukrainian counterpart and was told that Kiev would help top up Moldova's faltering gas supplies. Gazprom said the only way Ukraine could help Moldova would be with "stolen gas".

There was no sign last night that Russia and Ukraine were willing to restart negotiations, though international pressure for them to resume was starting to build, particularly from the European Union.

Germany, which is Russia's best gas customer in Europe, indicated it was expecting a responsible approach. "Thirty per cent of our gas comes from Russia at the moment. That should be increased," said the Economy minister, Michael Glos. "But it can only be increased if we know that deliveries from the east are dependable."

Russia's relations with Ukraine have seldom been worse. Mr Yushchenko's election victory, his talk of joining the EU and Nato, and now the gas dispute have infuriated Kremlin officials who want Ukraine to return to the Russian sphere of influence.

Emotions are running high in Kiev, too. "It is an unprecedented provocation, it is an attempt to break Ukraine on all issues - economic, political, social," said Albert Dyachenko, a retired military officer.