- The Washington Times - Tuesday, January 3, 2006

MOSCOW — Russia was forced to all but abandon a natural gas blockade against neighboring Ukraine yesterday after European trade partners complained that their own supplies were hit and warned Moscow that relations would suffer.

State-controlled Gazprom said yesterday it would restore full gas supplies to Europe by today, two days after the gas monopoly cut supplies to Ukraine in a dispute over a steep price increase.

Gas deliveries across Europe, which imports a quarter of its needs from Russia, started to fall dramatically as Moscow reduced exports through a pipeline to Ukraine that continues on to European customers.

Russia, which took over chairmanship of the Group of Eight leading industrialized nations for the first time this month and promotes itself as a reliable energy source, made the cuts on Sunday after Ukraine rejected Moscow’s demand for a fourfold price rise.

But Germany, its main trade partner, told Moscow it would think twice about importing more gas unless Russia could prove it was a reliable supplier.

As criticism mounted, Gazprom said while its supplies cut to Ukraine remained in effect, it had piped across an extra 95 million cubic meters of gas a day to Europe and planned to restore full supplies by this evening. But it made clear it held Ukraine responsible for the problem.

“With the aim of preventing a possible energy crisis, caused by Ukraine illegally taking gas, Gazprom has taken the decision to deliver additional gas into the gas transport system of Ukraine,” the company said in a statement.

“We stress that the additional delivery of gas is not designed for Ukrainian consumers but is meant for transit through the territory of Ukraine for delivery to consumers outside the borders of Ukraine.”

Ukraine, which denies stealing any gas, accused Russia of blackmail, saying Moscow wanted to destabilize its economy.

But the dispute with Ukraine remains unresolved, and Russia will still pump 30 million cubic meters a day of gas less than it did at the end of 2005. That is about 6 percent of the total Gazprom normally pumps to Ukraine and onward to Europe.

Russia said it had no choice but to turn off the taps after Ukraine refused to sign a new contract that would have ended the preferential price treatment of the Soviet era.

Tiny Moldova, another ex-Soviet state that like Ukraine has shifted its attentions to the West from Moscow, said Russia had all but cut off its gas supplies, also because it refused to accept higher prices.

German Economy Minister Michael Glos — Germany is Russia’s biggest gas customer — said Moscow must show it can be trusted as a supplier.

“Thirty percent of our gas comes from Russia at the moment. That should be increased,” Mr. Glos told the German radio station WDR. “But it can only be increased if we know that deliveries from the east are dependable.”

Washington, wary of any indication Moscow could use energy as a political weapon, also stepped in.

“Such an abrupt step creates insecurity in the energy sector in the region and raises serious questions about the use of energy to exert political pressure,” State Department spokesman Sean McCormack said in a statement Sunday.

Western Europe, where demand is near peak levels because of freezing weather, imports 25 percent of its gas from Russia, most of it via pipelines running across Ukraine.

German, Italian, French and Austrian energy ministers have urged Moscow and Kiev to keep gas flows steady, and a European Union meeting is due tomorrow.

The Kremlin says the dispute is a commercial matter. Kiev says it is an attempt to undermine its West-leaning government ahead of a hotly contested parliamentary election in March.

“A scenario aimed at creating economic pressure and blackmail has started,” the Foreign Ministry in Kiev said.

Ukrainian President Viktor Yushchenko, who came to power in the Orange Revolution a year ago, is trying to take his state into the EU and NATO, to the irritation of Moscow which deeply resents any loss of influence over the former Soviet Union.

There was no indication yesterday that talks were going on between Kiev and Moscow, or when they might resume.

Investors are watching Gazprom especially closely after Russian President Vladimir Putin signed documents last month freeing up trade in its shares to foreigners.

Mr. Yushchenko said Ukraine can pay more for its gas, but will not agree to a big jump all at once. Moscow wants to raise the price to $230 per 1,000 cubic meters from the current $50, bringing it into line with market levels.

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