Helen Womack in Moscow
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The acrimonious gas dispute between Ukraine and Russia was blamed yesterday for disrupting supplies across Europe, with six countries reporting reductions in the middle of a new year cold snap.
The Russian state gas company, Gazprom, hardened its position by threatening to increase the price at which it sells gas to Ukraine, even as the Czech Republic, Turkey, Poland, Hungary, Romania and Bulgaria said that they had suffered drops in supply of between 5 and 30 per cent. The dispute was triggered on New Year’s Day when Gazprom cut the flow of gas to Ukraine after its existing contract expired and the two sides failed to reach agreement on a new deal.
Ukraine is the main transit route for Russian gas pipelines to the European Union, which relies on Moscow for about a quarter of its supply. It has been accused of siphoning off gas destined for other European customers. Big consumers such as Germany have yet to be affected but if the dispute continues it could result in energy cuts across Europe in the middle of winter.
Many European countries built up reserves of gas after a similar row in 2006 and there is no immediate threat of a complete cut-off – but the longer the stalemate lasts, the greater the risk of an emergency.
Last Friday a Ukrainian delegation visited Prague and other European capitals to explain Kiev’s point of view. The Czech Republic, which assumes the presidency of the EU, made clear that it was reluctant to be dragged into what it said was a purely bilateral trade issue unless Europe started to feel the effects.
EU ambassadors will meet in Brussels today to discuss the crisis. The international arbitration court in Stockholm may also be called in to decide whether Kiev owes Moscow fines for failing to pay its bills on time. Relations between the two have been increasingly hostile since the Orange Revolution in Ukraine in 2004, with each accusing the other of “energy blackmail”.
Urmas Paet, the Foreign Minister of Estonia – which has had numerous disputes with Russia – said yesterday that the EU had to find alternatives to reduce its dependence on Gazprom. Acknowledging, however, that there were few alternatives at present, he said the EU should think about how to influence Russia and Ukraine. “It is abnormal when presidents negotiate a gas price,” he said.
He was referring to President Medvedev of Russia and Vladimir Putin, the Prime Minister, finding themselves spending New Year’s Eve in the Kremlin, talking about household bills. President Yushchenko of Ukraine kept more of a distance from the argument, saying that he expected it all to be solved by Orthodox Christmas on January 7.
That, however, may be wishful thinking: Moscow’s 2009 price offer of $250 (£170) per 1,000 cubic metres of gas – which Mr Putin said was “humanitarian”, and which was offered to Ukraine for “fraternal” reasons – has since been withdrawn. Kiev was then asked to pay the “market” price of $418 per 1,000 cubic metres. Yesterday Alexei Miller, head of Gazprom, threatened to raise the price to $450.
Ukraine has said that, with global energy prices falling, it is not prepared to pay more than $235. It also rejected fines of $600 million imposed because its payments for November and December failed to reach Gazprom’s bank account before close of business in 2008.
The president of Russia’s Gas Society, the state Duma Deputy Speaker Valeri Yazev, called on the EU to work out a unified position on the gas problem – and not in Ukraine’s favour.
“Russian-European gas cooperation is 40 years old,” he said. “The Russian side has flawlessly carried out its obligations before European partners. But in recent years the so-called Ukrainian transit factor has been hindering our cooperation. European countries should figure out how to lodge claims against Ukraine, seeking damages.”
Oleh Dubina, head of the Ukrainian Naftogaz company, said he was still hoping to break the deadlock: “We have not quit negotiations. We are talking over the phone every day. I am ready to fly out to Moscow even now if there are possibilities, if there is a normal approach or normal relations.”
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Brent, the quoted price is in metric (Kscm) divide by 35.3 to get a Mcf price.
Simon, perth, australia
Brent: Cubic meter is about 35.25 cubic feet. To export gas across an ocean, you need liquid gas tankers and other infrastructure that will take years to build - and may be even longer to get permissions. By the way, is more expensive way of transportation comparing to pipelines.
Yura, Hamden, CT, US
Brent, price was $250 per 1000 cubic metres, not feets. It is said in the article, read more carefully. And the problem was that Naftogaz didnt pay at time, at least with 2 month delay.
Eugene, Moscow,
So many words wasted in this article to drag a veil over simple and unpalatable fact : the Ukrainian supposedly democratic and pro-Western Orange government is just stealing Russian gas destined for EU.
Alexey, Moscow, Russia
one cubic meter equals 35.3 cubic feet. At US$6/million cubic feet, one gets to US$212/million cubic meters. Transit costs would eliminate any profit on US gas exports at $6/MCF.
Paul, Fairfax,
Brent, Oklahoma City
Are you really in business there?
You don't know what is MCM and MCF and why price is different.
I don't think America could sell gaz because it doesn't have enough for america needs.
Man you better to google information before say something!
Alex, Syktyvkar, Russia
Seriously, $235 an MCF or $450 an MCF?!? In Oklahoma, the current market price is less than $6 an MCF (I am in the oil and gas business here). Can someone tell me what I'm missing? Is gas being measured differently? Is there really that much price disparity? I can't believe we aren't exporting gas.
Brent, Oklahoma City, Oklahoma, USA
Romania doesn t need russian gas, there s enough romanian gas here, in soil or in Black Sea, but the government keep buying gas as a bribe for Russia, and as a way to steal money from the people. You know, Germany were in WW II only using romanian fuel...
Alex Coman, Medgidia, Romania