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RUSSIA: Gas Dispute Raises Political Heat

Kester Kenn Klomegah

MOSCOW, Jan 6 2009 (IPS) - Disputes over gas supply from Russia to Europe have again taken on a political dimension.

After Ukraine failed last week to negotiate a new price for Russian gas and to pay more than 600 million dollars demanded by Russia, Prime Minister Vladimir Putin ordered the country’s gas giant Gazprom to reduce supplies. Gazprom pulled the plug Jan. 1, while maintaining supplies to European Union consumers.

Russia has accused Ukraine of siphoning off large quantities of gas meant for European customers. Ukraine denies theft, and has accused Russia of escalating the crisis.

A similar dispute three years ago disrupted supplies across Europe, and EU consumers feared a repeat this year after a significant fall in supply over the past few days. Supplies of Russian gas to south-eastern Europe dropped on average 24.7 percent over the weekend, Gazprom reported.

Bulgaria, Greece, Macedonia, Romania and Turkey saw a fall of about 16 million cubic metres between Sunday and Monday morning, said Igor Yelkin, a representative from the Gazprom subsidiary which oversees distribution in the region.

Romania saw a 33.8 percent drop, followed by 22 percent for Turkey and 15.9 percent for Greece, Yelkin told Bulgaria’s BTA news agency. Hungarian and Czech authorities reported a decrease of 20 percent and 9.5 percent respectively.

The EU depends on Russia for around a quarter of its gas, 80 percent of which is pumped through Ukraine. Russia decided to reduce its gas deliveries following an unending battle over payment for 65.3 million cubic metres of “stolen gas” through Ukraine.

Since the end of the Soviet era, Russia has persistently locked horns with its neighbouring ex-Soviet republic over a wide range of issues. These have included the pro-western policies adopted by President Victor Yushchenko, especially Ukraine’s bid to join the North Atlantic Treaty Organisation (NATO) and U.S. plans for military bases in Ukraine.

But some analysts say Russia is flexing too much muscle through its energy policy. Mathias Roth, a visiting research fellow at the Centre for European Policy Studies (CEPS) in Brussels, says the Russian leadership is seeking to demonstrate that Moscow can still take benefits away from post-Soviet countries that pursue closer relations with the west.

“In reality, this policy decision had been taken a long time ago,” Roth told IPS. “But the energy dispute suggests that both sides have to demonstrate their willingness to pursue pragmatic cooperation, and that Russia still remains a key partner of pivotal importance to Ukraine.”

Last month, Russia alleged that Ukraine owes money from the previous year, and demanded a new price for gas supplied this year. Gazprom is demanding Ukraine pay 450 dollars per 1,000 cubic metres; EU countries pay about 500 dollars per 1,000 cubic metres.

Russia made a demonstration of just what it would do. Gazprom chairman Alexey Miller told Putin at an emergency meeting Monday, telecast over state-owned NTV, that Ukraine had diverted 65.3 million cubic metres of gas from the pipeline running to western Europe.

Putin asked Miller what Gazprom planned to do about this. “There is a proposal that the amount (of gas) supplied to the Russian-Ukrainian border be reduced by the amount that has already been stolen, and then export supplies should be reduced each day by an amount that may be stolen that day,” Miller replied.

“Okay, I agree. Start such reductions, and inform our European partners and the European Commission about the situation,” Putin said.

Miller said that in order to compensate for gas undersupplied to western Europe through Ukraine, Gazprom will increase the amount of gas pumped to the west through Belarus, Poland and the Blue Stream pipeline in Turkey.

A contract on transit of Russian gas through Ukraine is valid until the end of 2010. But on Monday a court in Kiev barred national energy trader Naftogaz from channelling Russian gas under this contract.

Some EU members are looking for alternative solutions to their energy problems. Estonian Foreign Minister Urmas Paet says the EU should cut dependence on Gazprom.

“The gas dispute between Russia and Ukraine shows that the EU should centre more on the common energy and security policy,” Paet told Estonian television. “Such crises would not have been that serious if there had been other delivery channels through which the EU could buy gas. Then the dependence on Gazprom would not have been that threatening.”

The EU should think about “how to influence Russia and Ukraine,” Paet said. “It is abnormal when presidents negotiate gas price.”

The minister said he was surprised that the Czech Republic, the current president of the EU, had decided not to get involved.

Russian leaders say this is a purely financial dispute with Ukraine. It is “free of any hidden political motives, and is purely a fragile disagreement on an economic matter,” Russian deputy Akhmed Bilalov told IPS.