- The Washington Times - Saturday, January 3, 2009

MOSCOW | Ukraine has siphoned some of Russia’s natural-gas shipments that were headed to the Balkans, the Russian gas monopoly Gazprom said late Friday — a day after it cut supplies to Ukraine in a contract dispute.

But Ukraine’s Naftogaz company said it was only using some of the gas that Russia pumps through the country to keep its pipeline system operating, and that it should not be blamed for the supply reductions to the Balkans. Naftogaz said it was Gazprom’s duty to ship this so-called “technical” gas.

Naftogaz uses the same pipeline system to serve both domestic and transit gas customers.

Gazprom Deputy Chairman Alexander Medvedev urged Ukraine to comply with agreements to maintain shipments, saying Balkan countries were “suffering” from a reduction in supplies.

Romania marked a 30 percent to 40 percent drop in Russian supplies Friday evening, the country’s Transgaz transport company said, according to Realitatea TV.

Poland saw a 6 percent decrease in the gas flow from Ukraine, according to the Polish gas monopoly PGNiG and pipeline operator OGP Gaz-System.

Customers in Poland and Romania have not been affected so far, however. Transgaz’s managing director told Realitatea TV that Romania had two days’ worth of supplies to meet customer needs. And the Polish gas interests said the country was making up the 6 percent deficit with supplies from another receiving point, on the border with Belarus.

Meanwhile, Ukrainian officials were visiting European capitals Friday to argue their case in the dispute with Russia. They also were reassuring neighbors that Kiev would not interrupt gas supplies, according to Bohdan Sokolovsky, energy adviser to Ukrainian President Viktor Yushchenko.

The Ukrainian delegation, led by Energy Minister Yuriy Prodan and including Naftogaz’s deputy chief Volodymyr Chuprun, traveled to the Czech capital of Prague, Slovakia’s capital of Bratislava and then to Brussels for meetings with officials.

“Our aim is to explain our position to our European partners on the situation which arose in the gas sphere,” Mr. Sokolovsky said by telephone from Bratislava.

A Russian Foreign Ministry statement asked the European Commission to convene a special session so it also could tell its side of the story.

On Thursday, state-controlled Gazprom cut off gas supplies to Ukraine, saying Ukrainian officials had failed to pay a $2.1 billion bill. Ukrainian and Russian officials held no face-to-face talks Friday.

It was not the first time Russia cut Ukraine’s supplies. In a 2006 dispute, Russia halted Ukraine’s shipments, which temporarily affected supplies to Europe and led to accusations that Russia was an unreliable energy source.

Many in the West viewed the 2006 cutoff as a Russian effort to punish Ukraine’s political leaders for their pro-Western policies.

This year, Russia has tried to paint the conflict as a purely commercial matter, and both countries pledged to keep gas flowing through Ukraine’s pipelines to the rest of Europe.

Ukraine and several other European countries said they had stockpiles to last through a short-term gas shortage.

Germany’s E.ON Ruhrgas utility said that, as of Friday, it had seen no disruption of Russian gas deliveries - though any effects would be noticeable only next week because of the distance the gas travels.

In any case, “we have nearly 25 percent of our annual needs … in reserves, so that even if gas volumes from Russia were to be reduced, we are well prepared,” German Economy Ministry spokeswoman Beatrix Brodkorb said in Berlin.

Chancellor Angela Merkel’s spokesman Thomas Steg called on both sides to “negotiate quickly and constructively” on a new contract.

The recent decline in energy prices has hit Russia hard, and Gazprom faces a sharp drop in demand.

It halted Ukraine’s supplies after Kiev made a $1.5 billion overdue payment. But Russia demands another $600 million, including $450 million in penalties for the late payment for gas shipped in November and December.

The two sides also have not agreed on prices for 2009. Gazprom CEO Alexei Miller said Thursday that Ukraine would have to pay $418 per thousand cubic meters the price Russia will charge European customers over the next few months.

Those prices are expected to slide as the gas market begins to reflect the fall in world oil prices. Last year, Ukraine paid $179.50 per 1,000 cubic meters of gas.

Meanwhile, Ukraine says Russia should pay more to ship through its pipelines, which carry 80 percent of the gas Russia sells to European Union customers.

The dispute reflects the strain in the two former Soviet nations’ relations that developed after Ukraine’s 2004 Orange Revolution brought a pro-Western government to power.

Ukraine has angered the Kremlin further by seeking to join NATO and by supporting Georgia during its August war with Russia.

Efforts to resolve the dispute are also hampered by the rivalry between Mr. Yushchenko and Prime Minister Yulia Tymoshenko, experts said.

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