Europe gas halted as Russia-Ukraine deal falters

http://news.theage.com.au/world/euro...

January 13, 2009 - 6:30PM

Russia's natural gas supplies bound for a freezing Europe were halted on Tuesday only a few hours after starting again as an EU-brokered accord between Russia and transit state Ukraine broke down.

Ukraine state gas company Naftogaz said it was blocking transit of the gas through its territory because Russian energy giant Gazprom was imposing "unacceptable" conditions for the transit.

Gazprom's deputy chief Alexander Medvedev was quoted by Russian news agencies as saying: "In these circumstances, we physically can't carry out transit of gas through Ukraine's territory."

"The Ukrainian side cynically informed us that the gas transport system had been reoriented to domestic consumers," he added.

State television broadcast images from Sudzha, a gas pipeline terminal on the border between Russia and Ukraine, with local official Alexei Fyodorov saying: "Ukraine is not taking the gas."

A European Commission spokeswoman in Brussels reported that "little or no gas" was reaching Europe through Ukraine. "This situation is obviously very serious and needs to improve rapidly," she said.

The European Commission also urged Russia and Ukraine to allow EU monitors deployed as part of an agreement to monitor gas flows through Ukraine to be given full access to dispatching centres in Moscow and Kiev after problems were reported.

Russia announced it had partially resumed supplies to through Ukraine shortly after 0700 GMT, with EU mediation apparently bringing to a close a crisis that has set off alarm bells over Europe's energy security.

Factories have been closed down, schools suspended and hundreds of thousands of homes left without gas heating over the past week across the worst-hit regions of central and eastern Europe.

Russia on Tuesday said it would initially pump only "test" amounts of gas after a deal that had been hailed by the EU's executive arm, the European Commission.

But the truce in what Russian media is calling a "gas war" was always going to be fragile.

"Moscow and Kiev lit up a pipe of peace, but both are getting ready for new gas wars," read a front-page headline in the Kommersant business daily.

Gazprom "threatens to once again stop transit if Ukraine continues to siphon off gas for technical needs, while Kiev does not hide its intent to do precisely that," the newspaper said.

Ukraine has repeatedly warned of problems in resuming supplies, with much attention paid to the issue of "technical gas" used to maintain pipeline pressure and keep supplies moving.

Russia has insisted it is up to Ukraine to provide such technical gas as part of transit agreements, while Ukraine has insisted Russia should provide the technical gas in addition to the volumes for delivery.

The ex-Soviet neighbours have also not yet resolved the basic dispute that initially sparked the crisis on January 1, involving Ukraine's debts to Russia, fines for late payment, and a new price for gas in 2009.

European Commission spokesman Ferran Tarradellas urged Russia and Ukraine to resolve their dispute quickly "in order to find a permanent solution that would restore the stability in our energy relations with Russia and Ukraine."

The EU relies on Russian gas pumped via Ukraine for a fifth of its supplies.

At an emergency meeting in Brussels on Monday, EU energy ministers concluded that the 27-nation bloc needed to increase investment in energy infrastructure to reduce its dependence on Russia.

"Europe is totally short-sighted about its joint energy policy," lamented Italian Energy Minister Claudio Scajola. "It should not be dependent on people who can bring a country to its knees by turning off the taps."