Ukraine gas halt ‘could hit Europe’

Oando's 128 Km gas-pipeline16 June 2014, News Wires – The boss of Gazprom has warned of a potential risk to disruption of gas exports to Europe after the Russian gas giant carried out its threat to cut off supplies to Ukraine as lawsuits were issued by both sides after the breakdown of debt payment talks earlier on Monday.

Ukraine’s Energy Minister Yuri Prodan confirmed that supplies to Ukraine “have been reduced to zero”, although he guaranteed reliable gas flows would continue to Russia’s European clients who receive imports through pipelines via Ukraine, according to Reuters.

However, Gazprom executive chairman Alexei Miller warned there was “not an insignificant risk” that gas deliveries to European clients could be disrupted if Ukraine fails to carry out its contractual obligation to ensure uninterrupted flows to the continent.

He also blamed the Kiev government for taking an “unconstructive” stance in the failed talks to agree on a gas price for future supplies, claiming it  wanted “an ultra-low price” and “adopted a position that can only be called blackmail”.

Gazprom had demanded that Ukraine state-owned gas utility Naftogaz pay nearly half of an accumulated $4.5 billion debt by an early-morning deadline or risk having its supplies cut off, with the company saying it would now be demanding upfront payments for future supplies.

The Russian gas giant has now filed a lawsuit with Stockholm arbitration court to recover its entire debt while Naftogaz has taken similar action in the same court to reclaim an alleged $6 billion in export overpayments to Gazprom.

A long-term reduction of supply could hit European Union consumers, which get about a third of their gas needs from Russia, around half of it through pipelines that cross Ukraine.

Earlier price disputes led to the ‘gas wars’ in 2006 and 2009, and Russian accusations that Ukraine stole gas destined for the rest of Europe.

EU Energy Commissioner Guenther Oettinger, who brokered the failed talks overnight, said in Vienna the EU might have a problem and urged Russia to reconsider a compromise proposal involving an initial $1 billion payment by Kiev followed by monthly debt repayments.

He said he was confident of gas supplies and also held out the prospect of further talks to solve the row, although this would now appear a more remote prospect given both sides are resorting to litigation.

However, Russian Prime Minister Dmitry Medvedev said talks could start only when Naftogaz had paid its debt in full.

His Ukrainian counterpart Arseny Yatseniuk accused Russia of deliberately blocking a deal to cause Kiev supply problems next winter, when temperatures plunge and heating needs increase.

“But it is not about gas. It is a general Russian plan to destroy Ukraine,” Yatseniuk said. “It is yet another step against the Ukrainian state and against Ukrainian independence.”


– Upstream

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