Russia-Ukraine gas row disrupts supplies to EU

Russia and Ukraine looked no closer to compromise today over a gas row that has disrupted supplies to at least four European Union countries as they face freezing winter temperatures.

Poland, Hungary, Romania and Bulgaria have reported drops in supplies after Russian state-controlled gas export monopoly Gazprom (GAZP.MM) cut off Ukraine on New Year's Day in a row over prices.

Germany, Europe's biggest economy, has so far not seen supplies drop. The European Union, which gets about a fifth of its gas from pipelines that cross Ukraine, has demanded that transit and supply contracts be honoured.

But Russia and Ukraine's gas companies traded allegations throughout Saturday, indicating the prospect of a swift resolution to the row could be remote.

Gazprom said Russian President Dmitry Medvedev had approved its move to take Ukraine's state-run gas company, Naftogaz, to the arbitration court in Stockholm over gas transit to Europe.

Naftogaz said it planned to file a counter-suit against Gazprom in Stockholm if the gas giant took it to court.

Ukraine, reeling from an economic crisis, said the higher gas price being proposed by Gazprom would lead to a humanitarian catastrophe and warned of "serious problems" for transit supplies to the EU if the row was not resolved in 10 to 15 days.

Moscow says Kiev is stealing gas intended for Europe and playing political games. Ukraine accused Russia of using "energy blackmail" and of not providing enough gas for the proper functioning of the transit system.

A similar dispute briefly disrupted supplies to Europe three years ago. That crisis prompted calls for the EU to diversify its energy supplies, but it has struggled to break its reliance on Russian gas.

The European Union has called an emergency meeting of envoys for Monday to discuss the row, which has again placed Russia's reputation as a reliable gas supplier under intense scrutiny.

Russia's ties with the West are still fraught after it waged a war with Georgia last August, and some policymakers see parallels with Russia's treatment of Ukraine which, like Georgia, has angered the Kremlin by seeking to join NATO.

European Union president the Czech Republic said on Saturday it would not get involved in the row between Moscow and Kiev.

"We refuse to be participants or arbiters in this dispute that we consider a business dispute," said Czech Deputy Prime Minister Alexandr Vondra. "Russia and Ukraine must agree fast."

Vondra said EU countries had sufficient reserves for now but that complications could arise if the dispute dragged on.

Gazprom, which says the row is purely about business with no political motives, said Kiev was not ready to resume talks.

"Since 31 December, Ukraine has refused to negotiate with Gazprom, and instead has resorted to siphoning off gas intended for European customers," Gazprom deputy CEO Alexander Medvedev said in a statement on Sunday.

Ukraine's Naftogaz has repeatedly denied it is stealing Russian gas destined for Europe. Naftogaz chief Oleh Dubyna said his officials were ready to go to Moscow at any moment to resume talks and sign a mutually acceptable deal.

"Russia is not giving enough gas for the transit system to work," Dubyna told reporters on Saturday.

The gulf between the two sides remains vast.

Russia said it was prepared to charge Ukraine $250 per 1,000 cubic metres this year before talks collapsed and now wants Kiev to pay $418. Dubyna said that price could tip Ukraine into a humanitarian crisis.

He said that even if Ukraine agreed to pay $250 instead of the $179.5 paid in 2008, it would ask Moscow to raise gas transit fees it pays to Ukraine by 40 percent. Moscow says it already has a transit contract to 2010.

Naftogaz also said Moscow could choose to return to an old barter arrangement, under which Moscow would give Ukraine fuel in exchange for gas transit to Europe. Gazprom described that proposal as "beyond commercial logic."

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