Russia Warned on Natural Gas Dispute
Russia Warned on Natural Gas Dispute
EU Plans Emergency Session to Address Sharp Drop in Gas Imports
By Peter FinnWashington Post Foreign ServiceMonday, January 2, 2006; 10:39 AM
MOSCOW, Jan. 2 -- Several European countries reported sharp drops Monday in the level of natural gas they are receiving from Russia as a dispute over pricing between the state-controlled Gazprom company and Ukraine threatened to damage Russia's reputation with its European customers as much as it hurts Ukraine. Russian natural gas destined for Western Europe transits a pipeline in Ukraine, and a reduction in the amount of gas entering the system from Russia, which was designed to only affect Ukraine, has led to reductions of up to 40 percent in supplies reaching Austria, Italy, Hungary, Poland, Slovakia -- all members of the European Union (EU) -- as well as Romania and Croatia.
Officials in Germany, which is about to embark on a multi-billion dollar pipeline project with Gazprom, which will increase the country's already heavy dependence on Russian natural gas, cautioned the Kremlin that it risked being seen as an unreliable energy partner. And a government minister reminded Russia that as chairman of the Group of Eight leading industrialized countries, which it assumed Monday, it should act responsibly. "Thirty percent of our gas comes from Russia at the moment. That should be increased," Germany's Economy Minister Michael Glos told German radio. "But it can only be increased if we know that deliveries from the East are dependable. One should naturally act responsibly."
Similar comments echoed across Europe.
"I think Russia now will be mindful of its reputation as a secure energy supplier," said British Energy Minister Malcolm Wicks in an interview on BBC radio. And in France,Le Monde newspaper said in an editorial that "in the heart of winter, Vladimir Putin turns off the faucet that permits 50 million Ukrainians to heat themselves and make their economy run."
The European Union will hold an emergency meeting on the issue Wednesday.
Gazprom officials, scrambling to explain a strategy that has begun to rebound, accused Ukraine of stealing gas destined for other European customers. The company cut gas supplies to Ukraine after the country's authorities rejected a four-fold, immediate price increase. Gazprom insists that it is continuing to pump enough gas to meet the supplies of other European countries.
"Given the indisputable theft of our gas from the export pipeline and with the purpose of guaranteeing the energy security of Europe we have decided to take all possible steps for Western consumers to continue receiving gas," said Gazprom Deputy Board Chairman Alexander Medvedev at a news conference in Moscow Monday. The company also uses a pipeline crossing Belarus, but even if it increased pressure on the pipeline, it could not substitute for the Ukrainian line.
Medvedev said Ukraine had siphoned off about $25 million worth of gas on Sunday. "If the theft continues at such a tempo, then the value of the stolen goods will be extremely significant," he said.
Gazprom said it has invited an independent Swiss firm to audit the amount of gas entering Ukraine to prove its assertion that it was putting enough gas into the system in Russia, but that it is going missing before it reached Ukraine's western border. "Today they have gone to gas measuring stations and are beginning independent recording of the quantities of gas entering the Ukrainian transporting network," said Medvedev.
Ukraine's Fuel and Energy Minister Ivan Plachkov flatly denied that his country was stealing natural gas.
"There has been no unauthorized diversion of gas," he said at a press conference in the Ukrainian capital, Kiev. "Ukraine is using its own gas, gas from underground stores and gas from Turkmenistan in strict compliance with the signed contract." But he warned that if temperatures drop in Ukraine, leading to a surge in demand, then "we will start consuming Russian gas received as payment for the transit under the existing contract terms."
Despite assurances to its own population that it had enough gas in reserve to last through the winter, the Ukrainian Emergency Situations Ministry reported drops in the level of gas on domestic lines, raising the threat of cuts or rationing for homes and industry. And Ukrainian Prime Minister Yuriy Yekhanurov called on the country's major industries to reduce natural gas consumption and switch completely to other energy sources if they can. Some Ukrainian industries, such as steel and chemicals, are heavily dependent on natural gas to power their plants.
Gazprom announced last month that it intended to raise prices for Ukraine from $50 to $230 per 35,300 cubic feet of gas. Ukraine, which insists on a much slower transition to market prices, refused to pay. On Sunday Gazprom, the world's largest supplier of natural gas, began reducing the amount of gas entering the trans-Ukraine pipeline.
Ukrainian officials say that the new pricing is political punishment for the country's pro-Western direction under President Viktor Yushchenko, who wants to take Ukraine into NATO and the European Union. They point out that other former Soviet republics, such as Belarus, Armenia, and Georgia, pay between $47 and $110 per 35,300 cubic feet of gas.
The Ukraine Ministry of Foreign Affairs said in a statement that the country was being subject to "economic pressure and blackmail" aimed "at undermining the stability of the Ukrainian economy and foiling Russian gas deliveries to consumers in EU countries."
Yushchenko said he wanted international mediators to settle the dispute and called for a moratorium on price increases while talks go ahead.
"We think moving to market principles in the gas sector could secure a resolution to the conflict about gas supplies and transit," he said during a meeting with European ambassadors in Kiev.
Austria's largest gas importer, OMV AG, said in a statement that natural gas supplies fell by as much as 33 percent since Sunday and "shortages for our biggest customers can't be excluded should deliveries drop further." Germany's largest gas supplier, ON Ruhrgas, said there could be some rationing to corporate customers if the dispute is prolonged or there is a severe cold snap in the country.
Some Ukrainians believe that rising concern in the European Union is strengthening Yushchenko's hand.
"Until Jan. 1, this was Ukraine's problem, but Russia has internationalized the dispute and is hurting its own image," said Vadym Karasiov, director of the Institute of Global Strategies, a research organization in Kiev. "Time is working for Ukraine now."
EU Plans Emergency Session to Address Sharp Drop in Gas Imports
By Peter FinnWashington Post Foreign ServiceMonday, January 2, 2006; 10:39 AM
MOSCOW, Jan. 2 -- Several European countries reported sharp drops Monday in the level of natural gas they are receiving from Russia as a dispute over pricing between the state-controlled Gazprom company and Ukraine threatened to damage Russia's reputation with its European customers as much as it hurts Ukraine. Russian natural gas destined for Western Europe transits a pipeline in Ukraine, and a reduction in the amount of gas entering the system from Russia, which was designed to only affect Ukraine, has led to reductions of up to 40 percent in supplies reaching Austria, Italy, Hungary, Poland, Slovakia -- all members of the European Union (EU) -- as well as Romania and Croatia.
Officials in Germany, which is about to embark on a multi-billion dollar pipeline project with Gazprom, which will increase the country's already heavy dependence on Russian natural gas, cautioned the Kremlin that it risked being seen as an unreliable energy partner. And a government minister reminded Russia that as chairman of the Group of Eight leading industrialized countries, which it assumed Monday, it should act responsibly. "Thirty percent of our gas comes from Russia at the moment. That should be increased," Germany's Economy Minister Michael Glos told German radio. "But it can only be increased if we know that deliveries from the East are dependable. One should naturally act responsibly."
Similar comments echoed across Europe.
"I think Russia now will be mindful of its reputation as a secure energy supplier," said British Energy Minister Malcolm Wicks in an interview on BBC radio. And in France,Le Monde newspaper said in an editorial that "in the heart of winter, Vladimir Putin turns off the faucet that permits 50 million Ukrainians to heat themselves and make their economy run."
The European Union will hold an emergency meeting on the issue Wednesday.
Gazprom officials, scrambling to explain a strategy that has begun to rebound, accused Ukraine of stealing gas destined for other European customers. The company cut gas supplies to Ukraine after the country's authorities rejected a four-fold, immediate price increase. Gazprom insists that it is continuing to pump enough gas to meet the supplies of other European countries.
"Given the indisputable theft of our gas from the export pipeline and with the purpose of guaranteeing the energy security of Europe we have decided to take all possible steps for Western consumers to continue receiving gas," said Gazprom Deputy Board Chairman Alexander Medvedev at a news conference in Moscow Monday. The company also uses a pipeline crossing Belarus, but even if it increased pressure on the pipeline, it could not substitute for the Ukrainian line.
Medvedev said Ukraine had siphoned off about $25 million worth of gas on Sunday. "If the theft continues at such a tempo, then the value of the stolen goods will be extremely significant," he said.
Gazprom said it has invited an independent Swiss firm to audit the amount of gas entering Ukraine to prove its assertion that it was putting enough gas into the system in Russia, but that it is going missing before it reached Ukraine's western border. "Today they have gone to gas measuring stations and are beginning independent recording of the quantities of gas entering the Ukrainian transporting network," said Medvedev.
Ukraine's Fuel and Energy Minister Ivan Plachkov flatly denied that his country was stealing natural gas.
"There has been no unauthorized diversion of gas," he said at a press conference in the Ukrainian capital, Kiev. "Ukraine is using its own gas, gas from underground stores and gas from Turkmenistan in strict compliance with the signed contract." But he warned that if temperatures drop in Ukraine, leading to a surge in demand, then "we will start consuming Russian gas received as payment for the transit under the existing contract terms."
Despite assurances to its own population that it had enough gas in reserve to last through the winter, the Ukrainian Emergency Situations Ministry reported drops in the level of gas on domestic lines, raising the threat of cuts or rationing for homes and industry. And Ukrainian Prime Minister Yuriy Yekhanurov called on the country's major industries to reduce natural gas consumption and switch completely to other energy sources if they can. Some Ukrainian industries, such as steel and chemicals, are heavily dependent on natural gas to power their plants.
Gazprom announced last month that it intended to raise prices for Ukraine from $50 to $230 per 35,300 cubic feet of gas. Ukraine, which insists on a much slower transition to market prices, refused to pay. On Sunday Gazprom, the world's largest supplier of natural gas, began reducing the amount of gas entering the trans-Ukraine pipeline.
Ukrainian officials say that the new pricing is political punishment for the country's pro-Western direction under President Viktor Yushchenko, who wants to take Ukraine into NATO and the European Union. They point out that other former Soviet republics, such as Belarus, Armenia, and Georgia, pay between $47 and $110 per 35,300 cubic feet of gas.
The Ukraine Ministry of Foreign Affairs said in a statement that the country was being subject to "economic pressure and blackmail" aimed "at undermining the stability of the Ukrainian economy and foiling Russian gas deliveries to consumers in EU countries."
Yushchenko said he wanted international mediators to settle the dispute and called for a moratorium on price increases while talks go ahead.
"We think moving to market principles in the gas sector could secure a resolution to the conflict about gas supplies and transit," he said during a meeting with European ambassadors in Kiev.
Austria's largest gas importer, OMV AG, said in a statement that natural gas supplies fell by as much as 33 percent since Sunday and "shortages for our biggest customers can't be excluded should deliveries drop further." Germany's largest gas supplier, ON Ruhrgas, said there could be some rationing to corporate customers if the dispute is prolonged or there is a severe cold snap in the country.
Some Ukrainians believe that rising concern in the European Union is strengthening Yushchenko's hand.
"Until Jan. 1, this was Ukraine's problem, but Russia has internationalized the dispute and is hurting its own image," said Vadym Karasiov, director of the Institute of Global Strategies, a research organization in Kiev. "Time is working for Ukraine now."
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