Russia, Ukraine Trade Accusations Over Gas

MOSCOW – Russia's state-controlled natural gas monopoly on Monday accused Ukraine of diverting about $25 million worth of Russian gas intended for other European countries, a day after Moscow halted deliveries to Kiev in a price dispute.

Ukraine in turn accused Russia of trying to undermine its economy, calling for a resumption of gas price negotiations, this time including international experts.

Russia's OAO Gazprom halted gas deliveries to Ukraine on Sunday after Ukraine balked at paying quadruple the amount it previously paid for Russian gas, which accounts for about a third of the consumption in the country of 48 million people.

Gazprom supplies about one-quarter of the gas consumed in Europe. Most of that goes through pipes that cross Ukraine and the dispute has raised worries of widespread supply disruptions throughout much of the continent.

The only gas now being put into pipelines headed for Ukraine is intended for European customers, the company said.

Several countries reported problems Monday. In Hungary, major power users were asked to switch to oil as Russian gas supplies fell by 25 percent. Austrian petroleum giant OMV said Russian gas imports were down by a third in that country, while Slovakia said it was receiving just 60 percent of the gas it needs to export further West.

Gazprom deputy chairman Alexander Medvedev said Ukraine had siphoned off about 100 million cubic meters of gas on Sunday alone, worth about $25 million.

"If the theft will continue at such a tempo, then the value of the stolen goods will be extremely significant," he told reporters.

Gazprom has invited the Switzerland-based goods inspection and testing company SGS to record how much gas is entering Ukraine's pipeline network.

Ukrainian Prime Minister Yuriy Yekhanurov on Sunday denied Ukraine was siphoning off gas, saying "we are not using a single cubic meter of Russian gas." Ukraine's Fuel and Energy Minister, Ivan Plachkov, repeated the denial on Monday, Interfax reported.

"There has been no unauthorized diversion of gas. Ukraine is using its own gas; gas from underground stores and gas from Turkmenistan in strict compliance with the signed contract," Interfax quoted Plachkov as saying.

Turkmenistan is Ukraine's single-largest supplier of gas.

A spokesman for the Ukrainian state gas company Naftogaz, Eduard Zaniuk, declined to comment Monday on the drop in supplies to Gazprom's customers to the West.

Ukraine lashed back at Russia late Sunday, accusing Moscow of following "a scenario aimed at economic pressure and blackmail and ultimately at undermining the stability of the Ukrainian economy and foiling Russian gas deliveries to consumers in EU countries," the Foreign Ministry said in a statement.

Ukrainian President Viktor Yushchenko on Sunday also denounced Russia for imposing "obvious economic pressure on Ukraine." Relations between Russia and Ukraine have been chilly since Yushchenko came to power a year ago and vowed to move the country out of Russia's sphere of influence.

In Washington, State Department spokesman Sean McCormack said in a statement that such an abrupt gas stoppage "creates insecurity in the energy sector in the region and raises serious questions about the use of energy to exert political pressure."

Gazprom has demanded that Ukraine start paying $230 per 1,000 cubic meters of gas, which the company says is in line with world market rates. Ukraine paid $50 per 1,000 cubic meters last year.

Ukraine says such a huge leap would cripple the country's economy, which relies strongly on energy-intensive heavy industries. It has not objected to paying more but wants to phase the increase in gradually.

Supply problems to Europe could undermine Western trust in Russia's natural gas industry, one of the keystones of the country's economy, and tarnish Russia's stint as chairman of the Group of Eight, which formally started Sunday.

EU Energy Commissioner Andris Piebalgs said last week that Europe could cope with a temporary interruption to its gas supply. EU energy experts will meet Wednesday to examine the situation.