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Gazprom cuts supplies to Ukraine by 30%
Journal Staff Report

KIEV, March 3 Russian gas giant Gazprom on Monday cut natural gas supplies to Ukraine by 30% after the two had failed to settle a dispute over an estimated $600 million debt for previous gas supplies.

The reduction of gas supplies is deeper than the 25% cut that had been originally expected from Gazprom.

The move is a culmination of rising tensions between Gazprom and Ukraine over the past three weeks over the debts, which the Russian company had originally estimated at $1.5 billion.

President Viktor Yushchenko, concerned about the escalating tensions, called his Russian counterpart Vladimir Putin on Monday, the Kremlin reported, without disclosing details of the conversation.

At a meeting with Prime Minister Yulia Tymoshenko earlier Monday, Yushchenko warned the government against escalating the dispute into a gas war and said the government must move quickly to settle the dispute through talks.

The government, under Yushchenkos pressure, last week made several urgent transactions clearing most of $1 billion debt incurred by Ukraine in November and December 2007. But Gazprom said Friday Ukraine still owed $600 million for supplies in January and February.

The dispute is being watched carefully by the European Union amid fears that it may affect supplies of Russian gas to markets in Europe. The EU called on Russia and Ukraine to quickly resolve the dispute.

Ukraine normally imports about 152 million cubic meters of gas from Russia every day, but the latest gas supply cuts reduced the imports to about 103 million cu m a day, according to Naftogaz.

Naftogaz said the supply cutoff, although bigger than had been expected, will not cause supply disruptions partially because warm weather has been reducing demand for gas.

This is not critical, Valentyn Zemlianskiy, the head of the information department at Naftogaz, the national oil and gas company, said at a press conference. The consumption of gas is currently lower due to warm weather.

Naftogaz plans to use its own gas reserves to offset the supply reduction, adding that the warm weather will probably help Ukraine to endure the reduced gas supplies without any disruptions for at least one month.

Naftogaz has reserves and is ready to use them to cover all Ukrainian consumers, Zemlianskiy said.

Ukraine consumed 302 million cu m of gas every day in January, up from 266 million cu m consumed in January 2007, according to the energy and fuel ministry. The figures for February were not yet available.

Ukraines own gas extraction was currently running at 57 million cu m of gas daily, according to Naftogaz.

Ukraine heavily depends on Russian gas imports as domestic extraction covers just more than a quarter of its annual gas needs.

Ukraine imports about 55 billion cubic meters of gas annually, while domestic extraction is at 20 billion cubic meters a year, according to the energy and fuel ministry.

At the same time, Gazprom sends 110 billion cu m of its gas via Ukrainian gas pipelines to markets in the European Union that accounts for up to 80% of Russias Europe-bound gas supplies.

Ukraines underground gas tanks can technically hold up to 32 billion cubic meters of gas annually.

Ukrainian government officials earlier this year complained that the reserves were mostly owned by two gas traders affiliated with Gazprom, including RosUkrEnergo and its Ukrainian subsidiary UkrGaz-Energo. (tl/ez)




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