Gazprom set to cut ukraine gas shipments
02 March 2008
Published in Financial Times
By Roman Olearchyk and Catherine Belton
Gazprom, the Russian gas monopoly, is expected on Monday to reduce natural gas shipments to Ukraine, marking the second major energy stand-off between both countries since 2006 when supplies to Europe were dented during a price dispute.
This time, Gazprom has threatened to reduce supplies by some 25 per cent, arguing that the Ukrainian side has dragged its feet in settling some $1bn in gas bills from this and last year. Gazprom also claims Ukraine has failed to sign contracts for the supply of gas for this year.
”It is still possible that an agreement will be reached by the deadline on 10am Moscow time, but if not, gas shipments will be reduced to Ukraine by 25 per cent on March 3,” Sergei Kupriyanov, Gazprom’s spokesperson, said on Sunday.
By Roman Olearchyk and Catherine Belton
Gazprom, the Russian gas monopoly, is expected on Monday to reduce natural gas shipments to Ukraine, marking the second major energy stand-off between both countries since 2006 when supplies to Europe were dented during a price dispute.
This time, Gazprom has threatened to reduce supplies by some 25 per cent, arguing that the Ukrainian side has dragged its feet in settling some $1bn in gas bills from this and last year. Gazprom also claims Ukraine has failed to sign contracts for the supply of gas for this year.
”It is still possible that an agreement will be reached by the deadline on 10am Moscow time, but if not, gas shipments will be reduced to Ukraine by 25 per cent on March 3,” Sergei Kupriyanov, Gazprom’s spokesperson, said on Sunday.
The stand-off comes three weeks after Vladimir Putin,
Russia’s president, and Viktor Yushchenko, his
Ukrainian counterpart, announced a last-minute
settlement to avert reductions in gas to Ukraine,
whose vast pipeline system transports the majority of
Russian supplies to Europe. Their handshake agreement
envisioned the removal of controversial middlemen
companies from the gas trade between both countries.
It was also intended to avoid a repeat of a 2006
price dispute that triggered supply shortages to
Europe.
Gazprom and Naftogaz Ukrainy, Ukraine’s state energy company, have since failed to sign detailed agreements following the presidential accords. Last week, Gazprom renewed threats to cut gas supplies to Ukraine, but leaders in both countries have insisted European consumers would not be affected.
On Saturday, Yulia Tymoshenko, the Ukrainian prime minister, predicted that Gazprom would not reduce gas supplies, arguing that the Ukrainian side had fulfilled its obligations. Ms Tymoshenko repeated previous vows to remove what she describes as murky middlemen companies from the multi-billion-dollar gas trade between Ukraine, Russia and central Asian producers. Her government dubbed these middlemen as ”corrupt” and raised the spectre that they might not have passed payments on to Gazprom.
It remains uncertain when a final settlement could be reached and if it would entail further stiff price rises for Ukraine, which has seen the price it pays for gas imports skyrocket since 2006. Handling the dispute is viewed as a litmus test for Ms Tymoshenko, who returned as premier late last year following a strong showing in snap parliamentary elections.
The threat of gas reductions is not seen as a big threat to Ukraine, where demand has been lower this winter due to unusually warm weather. Speaking to journalists, Ms Tymoshenko said her government would seek to reduce wasteful gas consumption in Ukraine, which annually consumes some 70bn cubic metres.
Gazprom and Naftogaz Ukrainy, Ukraine’s state energy company, have since failed to sign detailed agreements following the presidential accords. Last week, Gazprom renewed threats to cut gas supplies to Ukraine, but leaders in both countries have insisted European consumers would not be affected.
On Saturday, Yulia Tymoshenko, the Ukrainian prime minister, predicted that Gazprom would not reduce gas supplies, arguing that the Ukrainian side had fulfilled its obligations. Ms Tymoshenko repeated previous vows to remove what she describes as murky middlemen companies from the multi-billion-dollar gas trade between Ukraine, Russia and central Asian producers. Her government dubbed these middlemen as ”corrupt” and raised the spectre that they might not have passed payments on to Gazprom.
It remains uncertain when a final settlement could be reached and if it would entail further stiff price rises for Ukraine, which has seen the price it pays for gas imports skyrocket since 2006. Handling the dispute is viewed as a litmus test for Ms Tymoshenko, who returned as premier late last year following a strong showing in snap parliamentary elections.
The threat of gas reductions is not seen as a big threat to Ukraine, where demand has been lower this winter due to unusually warm weather. Speaking to journalists, Ms Tymoshenko said her government would seek to reduce wasteful gas consumption in Ukraine, which annually consumes some 70bn cubic metres.