Russia warns Europe of possible gas cuts over Ukraine

26th September 2014, Comments 0 comments

Russia warned Europe on Friday that Moscow could cut off its gas supplies because some European countries have been re-exporting gas to Ukraine to help Kiev through its latest energy war with Moscow.

The threat came as energy chiefs gathered in Berlin for EU-mediated talks aimed at halting a Russian gas supply cut to Ukraine that could leave parts of the war-scarred nation without heat this winter.

The three-way meeting comes with trust between all sides lacking and any remaining good will between Moscow and Kiev dependent on the fate of a fragile truce in a pro-Russian uprising that has claimed more than 3,200 lives.

The peace pact has helped stem the bloodiest fighting but not to avert a fresh bid by the eastern insurgents to set up independent republics through parliamentary and leadership polls on November 2.

Ukrainian President Petro Poroshenko called Thursday on Russia not to recognise the votes' legitimacy and vowed to pursue his dream of the unified country applying for EU membership in 2020 and eventually joining NATO.

But Russia -- its economy stagnant and state revenues dependent on oil and gas sales -- appeared ready to up the stakes further in its Cold War-style standoff with the West over Ukraine.

Energy Minister Alexander Novak said the re-export to Ukraine of gas Europe buys from Russia was illegal and could see some of its nations go without fuel shipments from state energy giant Gazprom for the first time since 2009.

"The agreed contracts do not foresee a re-export," Russian Energy Minister Alexander Novak told Friday's edition of Germany's Handelsblatt business daily.

"We hope that our European partners will stick to the agreements. That is the only way to ensure there are no interruptions in gas deliveries to European consumers."

Novak's comments were published only hours after Ukraine's state energy firm Naftogaz reported an unexplained interruption of gas supplies it receives through Hungary.

Naftogaz noted that the apparent cut "came only a few days after a visit to Hungary by representatives from (Russian state gas firm) Gazprom."

- 'Economic aggression' -

Yet European sales -- even if uninterrupted -- would help Ukraine make up only a fraction of the volumes it usually buys from Russia.

Ukraine imported half of all gas it consumed last year from its historic eastern master. The so-called "reverse flow" shipments from Europe that Kiev was hoping for would have filled slighty more than a third of that gap.

Russia ended all gas sales to Ukraine in June after Kiev balked at paying a higher price imposed by Moscow in the wake of the February ouster of an unpopular Kremlin-backed president.

The Ukrainian pipelines accounts for about 15 percent of all gas imported by Europe -- reliant on Russia for about a third if its outside supplies.

But EU nations fear that Kiev may be forced to tap into those flows once the winter heating season begins.

Neither Ukraine nor the European Union expect Friday's negotiations -- delayed by Russia on several occasions -- to reach a breakthrough and are instead hoping to lay the groundwork for an interim deal.

"Experience shows that it is very hard to reach a compromise with the Russians," Ukrainian Prime Minister Arseniy Yatsenyuk told a Tuesday cabinet meeting.

Ukraine accused Russia of "economic aggression" and lodged a $6.0-billion (4.7-billion-euro) suit with a Stockholm tribunal after Gazprom hiked its gas price to $485.50 per 1,000 cubic metres from the $268.50 it charged the deposed administration.

Gazprom countered with its own $4.5 billion lawsuit in the same court linked to Ukraine's outstanding debts.

Analysts said Ukraine's Naftogaz now pays the highest rate of any of Gazprom's European clients.

Moscow's VTB Capital investment bank estimates that European utilities and gas traders paid Gazprom an average of $372 per 1,000 cubic metres in the first three months of the year.

Diplomats said the European Commission was proposing a compromise that would see Naftogaz pay Gazprom $385 per 1,000 cubic metres in the winter and $325 in the summer months.

But Gazprom walked away from a similar proposal just days before it shut off Ukraine's tap.


© 2014 AFP

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