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Russia to face gas shortages, aide says
Journal Staff Report

KIEV, Feb. 14 – Russia for the first time ever will face natural gas shortages this year that may lead to reduction of gas supplies to Ukraine and possibly to a regional turmoil.

Anatoliy Chubais, the chairman of RAO UES, Russia’s state-controlled power grid, said that Russia will probably have gas shortages of at least 4 billion cubic meters in 2007.

“For the first time the government has approved gas balance that has clause ?shortage of gas,” Chubais told Kommersant daily. He said the shortage will increase to 8 billion cu m in 2008 and to 40 billion in 2010. “So far there is no answer to the question how will the shortages be met.”

Analysts have long suspected that Russia is facing massive gas shortages, but Russian officials have been denying it. This is the first time that the top official has confirmed the looming shortages.

The development explains why Russia in anticipation of its own shortages has been seeking to stop selling gas at below market prices to Ukraine in 2006 and to Belarus in 2007.

Analysts said the spat with Ukraine and Belarus also had a political reason, such as Moscow’s attempts to slow down Ukraine’s accession to NATO and to force Belarus to accelerate pace of joining Russia in a single state.

However, the revelations of the looming gas shortages in Russia itself may now have potentially a much bigger impact on the regional developments.

A source at Gazprom said that Russia will most likely try to cancel some of the least beneficial contracts on exports of gas, suggesting that Ukraine’s gas supplies may be reduced.

Ukraine buys about 55 billion cu m of gas at $130 per 1,000 cu m in 2007, the lowest gas prices after Belarus, which buys about 11 billion at $100/1,000 cu m.

But gas supplies to Europe may also be under threat in the long-term as Russia has been failing to meet growing demand amid attempts to increase the role of the state in the energy sector.

Moscow has been putting pressure on top Western energy companies, such as Shell and TNK-BP, seeking to expel the Western interests from many lucrative energy development projects. At the same time, the projects have been increasingly awarded to Gazprom, the state-controlled gas giant.

The policy underscores plans of Russian President Vladimir Putin to name Russia a key player in world energy issues and thus to increase Russia’s global profile. But at the same time it has been reducing access to Western technologies and slowing down many energy development projects resulting in Russia’s failure to meet its own gas needs.

Putin’s controversial speech at an international security conference in Munich last week, when he has sharply criticized the West, suggests that Russia will continue the policy. (tl/ez)




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