EU: Russia, Ukraine to Accept International Monitors in Gas Dispute

Russia and Ukraine will accept international monitors to verify the movement of natural gas through Ukraine, the European Union announced Wednesday.

European Commission President Jose Manuel Barroso said telephone talks with Russian Prime Minister Vladimir Putin and his Ukraine counterpart Yulia Tymoshenko yielded the assurances that the use of monitors would be key to get the gas pumping again into European nations.

Russia shut off all its gas supplies to Europe through Ukraine Tuesday in a pricing dispute that has reduced or halted fuel deliveries to a dozen countries during a winter cold snap.

Putin, who is also the chairman of gas monopoly Gazprom, ordered the company to stop all gas shipments through the country as of 7:44 a.m., after sharply limiting supplies through Ukraine on Tuesday, said Valentyn Zemlyansky, spokesman for Ukraine's Naftogaz.

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About 80 percent of Russian gas to Europe is shipped via Ukraine. Other smaller pipelines run through Belarus and Turkey.

"It was the Russian side's decision to stop all gas deliveries to Europe" through Ukraine, Naftogaz head Oleh Dubina told reporters. "I think it is inappropriate."

Russia confirmed the cutoff, but said it was Ukraine's fault because it had shut down the last pipeline carrying gas from Russia. Gazprom also says it is reducing to compensate for the gas it accuses Ukraine of diverting.

Analysts say the escalation in the dispute comes at a tricky time for Putin, as falling energy prices threaten the financial and political stability in Russia that have helped him maintain his popularity at home, The New York Times reported.

Some expected Putin to become more conciliatory as energy prices fell, but he has kept a hard line in seeking to raise gas prices in Ukraine, The New York Times reported. The Russia-Ukraine natural gas dispute has left tens of thousands of people in Europe without heat as governments scrambled to find alternative energy sources.

By early Wednesday, Bulgaria, Greece, Macedonia, Romania, Croatia, Serbia and Turkey had all reported a halt in gas shipments, while France, Germany, Austria, Poland and Hungary had reported substantial drops in supplies from Russia.

Bulgaria, the EU's poorest member, was among the worst hit, with tens of thousands of people without central heating. Croatia declared a state of emergency and the situation in Bosnia was so dire that woodcutters revved up their chain saws to cut wood for fireplaces.

In the Czech republic, gas operator RWE Transgas confirmed Wednesday that Russian gas deliveries through Ukraine stopped completely overnight. The country still receives gas from another route from Norway and customers were not immediately affected, the company said.

Romania, which imports about 30 percent of its gas from Russia, said its president has called Putin to discuss the issue and that its government is holding an emergency meeting with producers and distributors.

The EU accused both nations of using consumers as pawns in their quarrel.

"It is unacceptable that the EU gas supply security is taken hostage to negotiations between Russia and Ukraine," EU spokeswoman Pia Ahrenkilde Hansen said, demanding an immediate resumption of gas supplies.

In Washington, U.S. officials criticized Russia for Europe's energy crisis.

"Cutting off these supplies during winter to a vulnerable population is just something that is unacceptable to us," State Department spokesman Robert Wood said.

U.S. national security adviser Stephen Hadley warned Moscow that using energy exports to threaten its neighbors will undermine its international standing.

Russia stopped all gas shipments to Ukraine on Jan. 1 after both countries failed to agree on prices and transit fees for next year.

Over the past week, Russia accused Ukraine of siphoning off tens of millions of cubic meters of gas meant for Europe from its transit pipelines.

Ukraine admitted diverting some transit gas, saying it had the right to use the fuel to run its pumping system. Gazprom then started dramatically reducing supplies to European consumers this week.

The crisis erupted after Russia and Ukraine failed to agree on a gas price for 2009 and on payment of $600 million Gazprom says it is due from Naftogaz.

In 2008, Russia charged Ukraine about half what it charged its European customers for gas. The subsidy is a legacy of the Soviet era, when both countries were part of the U.S.S.R.

Gazprom has long sought to charge Ukraine European-level prices. Ukraine says that if it pays more for gas, Russia should pay more for shipping gas through Ukraine.

Neither side has met for talks since negotiations broke down before midnight on Dec. 31, and each side has blamed the other for the breakdown.

The cut-off came after Gazprom and Ukraine's Naftogaz agreed to resume face-to-face talks and the head of Naftogaz said he would fly to Moscow on Thursday. Dubina, the Naftogaz head, said Wednesday the meeting was still on and that the two sides were looking for a solution to the crisis.

Russia has expressed frustration with the absence of negotiations, and said it is ready to resume talks anytime.

Ukraine may be in the stronger negotiating position.

The country had about 16 billion cubic meters of gas in its vast underground storage system Tuesday.

With Ukraine consumers using about 200 million cubic meters a day, and Ukraine producing some of its own gas, the country should not see shortages until early April, the government says.

Gazprom meanwhile is losing substantial income during a peak season for gas consumption. On a typical winter day, experts say, Gazprom would be pumping about 350 million cubic meters of gas to Europe. It also will soon see an excess of gas in its system that it will have to deal with.

Russia is diverting some of its gas exports around Ukraine, through Turkey and Belarus. But Gazprom relies on Ukraine's vast pipeline network to deliver the bulk of those exports.

The cut-off comes on Orthodox Christmas, celebrated in Russia, Ukraine and a number of other Orthodox Christian countries in Europe.

The Associated Press contributed to this report.