Russia prepares to cut Ukraine's gas as New Year deadline looms
2008-12-30

Nations Russia Ukraine City Kiev Moscow Category Regions Regions Europe Pacific Rim People Vladimir Putin Event 2008 Russia Gas Dispute Company Gazprom Source (AFP)

MOSCOW (AFP) - Russia's Gazprom energy giant said on Tuesday it had begun preparations to cut gas supplies to neighbouring Ukraine as a New Year deadline loomed for settlement by Kiev of a two-billion dollar debt.

Gazprom chief Alexei Miller appeared on television to announce that a special operations centre had been set up to oversee the threatened cut-off in the middle of the icy Ukrainian winter.

"Gazprom today formed an operations centre that has begun preparations" to cut supplies to Ukraine, Miller said.

"The countdown is now down to hours. If by the end of the day of December 31 Ukraine doesn't pay off its debt, Gazprom will have no basis for gas deliveries to Ukraine.

"We hope Ukraine will pay all its debt and sign a contract for gas deliveries for 2009," Miller said.

The looming crisis recalls a "gas war" at the start of 2006, when Russia briefly cut supplies to the neighbouring state, causing disruption in deliveries to the European Union, much of which transit through Ukraine.

The EU depends on Russia for around a quarter of its gas consumption.

This time, Ukraine's problems paying its debts to the world's largest gas supplier have been exacerbated by economic turmoil at home, in which the national currency, the hryvnia, has plunged in value.

Ukrainian officials do not dispute that Kiev owes Gazprom over 1.5 billion dollars for gas supplies in November and December but they have been reticent on the remaining portion, said to comprise fines for late payment.

In Kiev, a spokesman for Ukrainian energy company Naftogaz, Valentin Zemlyansky, said talks were continuing in Moscow and that a deal could yet be reached by the New Year.

"If they cut the gas it will have little effect because we have enough gas to take us through to the end of the season," Zemlyansky told AFP, referring to gas reserves Ukraine has built up in underground reservoirs.

"But we are preparing to complete the negotiations before the end of the year, even if we only have today and tomorrow to complete the contract and avoid celebrating New Year with Gazprom," he said.

Later Gazprom spokesman Sergei Kupriyanov reiterated a threat to move straight to charging Ukraine full European prices if the debt was not settled in time.

He also said a deal might be reached involving writing down the Ukrainian debt against future payments by Gazprom for transit through Ukraine.

"That's certainly being discussed but unfortunately no decision has been taken or documents signed," Kupriyanov told journalists.

The dispute comes against a background of heightened tensions between Russia and its ex-Soviet neighbour, which under President Viktor Yushchenko is trying to join the NATO military alliance against Moscow's strong objections.

This month Ukraine signed a strategic accord with the United States that was seen as boosting Ukraine's NATO prospects and included plans to open a US diplomatic mission on the sensitive Crimea Peninsula, where Russia has long been a major influence.

Despite the tensions, Yushchenko featured among a string of world leaders who were sent New Year greetings by influential Russian Prime Minister Vladimir Putin, according to the Russian government's website.

"Vladimir Putin voiced a wish for 2009 to become a year of trust and cooperation between the two states, allowing a further strengthening of Russian-Ukrainian ties," the website said.

Russia has said it doubts a gas cut-off to Ukraine would disrupt supplies through Ukraine to Europe as Ukraine now has large accumulated gas reserves and contracts for deliveries to Ukraine and transit through Ukraine have been separated.