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Russia flexes natural gas supply muscles
Journal Staff Report

KIEV, Oct. 2 Less than two days after a snap parliamentary election made likely a shift away from the countrys pro-Russian government, Russian gas giant Gazprom on Tuesday unexpectedly threatened to cut off natural gas supplies to Ukraine unless the country pays off a $1.3 billion debt for gas supplies within the next 30 days.

The surprise warning comes after pro-Western parties collectively outperformed pro-Russian groups in the Sept. 30 election and adds pressure on Yulia Tymoshenko, who is likely to replace Viktor Yanukovych as Ukraines next prime minister.

Gazproms threat to cut gas supplies to Ukraine triggered confusion over the debt as Naftogaz Ukrayiny, the national oil and gas company, was apparently not aware of it.

We have no idea what debt they are talking about, a Naftogaz official, who asked not to be named, said Tuesday. We need to understand where this figure came from.

Meanwhile, Gazprom said it already warned its European customers about the problems with gas supplies to Ukraine, a sign that the Russian company has been preparing for a clash.

Ukraine is a key country for the transit of Russian gas to markets in the European Union and any reduction of gas supplies to Ukraine may automatically affect shipments to the European Union.

Gazprom moves 110 billion cubic meters of gas annually to Europe via Ukrainian gas pipelines, which account for up to 80% of Russias overall European shipments.

The timing of the Gazprom threat raises suspicions that it may be politically motivated to influence the process of government formation in Ukraine. Western governments have earlier accused Russia of using its gas monopoly over the past two years for trying to put pressure on neighbors.

Meanwhile, Tymoshenko reacted to the Gazprom threat on Tuesday by pledging to change the system of gas deliveries to Ukraine by making it more transparent and by replacing controversial gas traders.

I insist that Russia and Ukraine will be working without intermediaries in the issue of gas supplies, Tymoshenko said at a press conference. Otherwise, why to change the government?

Tymoshenko also accused Yanukovych of unprofessional management of the gas sector and said that she will initiate investigation into the gas debts.

When Gazprom said that Ukraine owns the gas debt I would like to ask who gave them [Yanukovych] the right to take the money from Naftogaz and accumulate the debt before Russia? Tymoshenko said.

They leave us the country with gas debt at levels not seen since 1993-1995, Tymoshenko said. We will see who will bear criminal responsibility for this.

Meanwhile, the debt cited by Gazprom was probably owned by UkrGaz-Energo, a gas trader, to RosUkrEnergo, Ukraines only supplier of gas, industry analysts said. A source at UkrGaz-Energo confirmed that the company owes undisclosed money to RosUkrEnergo, but had refused to disclose the figure.

Yevhen Bakilin, the head of Naftogaz, said in August the company owed 2.5 billion hryvnias, or $500 million, to UkrGaz-Energo for gas supplies because many residential gas consumers delayed payments. (sb/ez)




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