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Russia pledges to resume natural gas flow
Journal Staff Report

KIEV, Jan. 12 - Russia pledged to resume supplying natural gas to the European Union Tuesday after Ukraine and the EU agreed to comply with its demand of placing its monitors throughout the supply route.

Ukraine had to sign the agreement twice - most recently on Monday morning - after the Russian government had rejected the original agreement in which Ukraine had declared it owed no money for gas so far.

Russia stopped gas supplies to the EU via Ukrainian gas pipelines on Jan. 7 and has so far failed to resume deliveries, citing the lack of progress in talks with Ukraine.

But a top energy security aide to President Viktor Yushchenko said Monday that the true reason for the suspension of gas supplies is because Russia be facing gas shortages of its own.

The Russian Federation and Gazprom do not have sufficient amount of gas for transporting to European consumers and thats why they delay solving of the gas problem with Ukraine, Bohdan Sokolovskiy, Yushchenkos top energy security envoy, said.

The comment echoes analyses by some Russian energy figures, such as Anatoliy Chubais, the head of United Energy Systems, Russias power monopoly and the biggest single consumer of natural gas from Gazprom, who has predicted Russia would face domestic gas shortage at 40 billion cubic meters by the end of 2010.

Sokolovskiy said Gazprom was losing up to $150 million per day due to the suspended supplies, a level of financial and image losses that cannot be justified by any other reason.

Gazprom already faces major financial challenges, in particular problems with paying wages, Sokolovskiy said in a statement posted by Yushchenkos press service. He added that the EU should investigate whether the Russian company has enough gas to meet the demand.

Russian Prime Minister Vladimir Putin said Monday that Gazprom had already lost $800 million on the stand-off, the figure that basically confirms Sokolovskiys estimates of losses.

Sokolovskiy said: It would be a logical step for the European Union to find out whats the real situation with availability of gas in Russia and its gas monopoly Gazprom.

Meanwhile, Ukraine on Monday signed an agreement allowing Russian experts to join EU monitors for inspecting Ukrainian gas pipelines, a condition imposed by Moscow for resuming gas supplies to the EU.

This is the second time that Ukraine signs the same agreement over the past 24 hours.

The agreement signed by Ukraine on Sunday in which Ukraine has declared it does not have outstanding gas debts owed to Gazprom was rejected by Russian President Dmitry Medvedev.

The agreement essentially allows Russian experts to join the group of EU monitors already inspecting the Ukrainian gas pipelines, gas compressor plants and underground gas tanks.

The agreement was negotiated by Czech Prime Minister Mirek Topolanek, who traveled to Kiev and to Moscow over the weekend. The Czech Republic, which accepted the rotating EU presidency on Jan. 1, and Topolanek has been making efforts to negotiate resumption of gas supplies to the EU.

A Ukrainian team, led by Deputy Prime Minister Hryhoriy Nemyria, on Monday left for Brussels to discuss the resumption of gas supplies to the EU.

Oleh Dubyna, the head of Naftogaz Ukrayiny, also joined the team, according to report by the Ukrainian government.

Russia insists that the same agreement be signed by the EU, after which it had pledged to resume gas supplies to via the Ukrainian territory.

Last week Dubyna at the talks with Gazprom CEO Alexei Miller in Moscow and Brussels failed to agree the resumption of gas supplies, with the Russia-Ukraine standoff sending shockwaves throughout Europe.

The dispute between Gazprom and Naftogaz emerged after the two companies at the talks in Moscow on Dec. 31 had failed to agree on prices that must be charged in 2009.

Gazprom suggested Ukraine must pay $250 per 1,000 cu m for gas supplies in 2009, up from $179.5 per 1,000 cu m currently.

But Naftogaz, citing steeply falling oil price on world markets since July, argued that market-based price for 2009 gas supplies cannot exceed $201 per 1,000 cu m.

Gazprom, which completely suspended natural gas supplies to Ukraine on Jan. 1, has earlier this week suggested that Ukraine must pay $450 per 1,000 cu m of gas in 2009, but Ukraine had rejected the price as too high.

It may take up to 36 hours for Russia to resume supplies of its natural gas to the EU via Ukraine once Russia considers its conditions had been met by Ukraine and the EU, Russian officials have said.

Ukraines gas transportation system has been working in emergency mode since Jan. 7 when Russian gas giant Gazprom without notice - stopped gas transit to the EU.

The move sent shockwaves throughout Europe with major gas supply disruptions reported in Slovakia, the Czech Republic, Germany, Austria, Italy, France, Hungary, Romania, Poland, Bulgaria, Turkey, Croatia, Greece, Macedonia and Moldova.

Ukraines gas pipeline accounts for 80% of Russian Europe-bound gas shipments, underscoring the importance of the supply disruption. Russia accounts for a quarter of Europes gas needs.

Ukraine moves more than 110 billion cubic meters of Russian gas annually to Europe, while Russia accounts for a quarter of Europes gas needs.

Ukraine shipped a total of 112.1 billion cu m of natural gas to Europe in 2007, down from 113.8 billion cu m shipped in 2006 and down from 121.5 billion cu m shipped in 2005, according to the Ukrainian government. (sb/ez)

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