Gas talks end in failure

News
Send to friend Print version

January 9, 2009, 3:12

Negotiations in Brussels to resume Russian gas supplies to Europe via Ukraine have broken up without agreement. The talks appear to have stumbled over the issue of who should be included in the international group sent to Ukraine to monitor the transit of gas.

Earlier, the EU and Kiev reached a bilateral agreement for European observers to travel to the country. However, Russia's Gazprom insisted company representatives should be included, a demand Kiev flatly rejected.



The aim of the inspectors is to make sure that no Russian gas is syphoned off once the flow restarts.



Gazprom CEO Aleksey Miller has blamed Ukraine for the failure of the negotiations.



“Ukraine has blocked the signing of the document to create a transit monitoring mission that would include experts from Europe and from Gazprom. We had a chance to resume supplies on Thursday but it didn’t happen. It’s Ukraine that should be held responsible for that failure,” Miller said.



Meanwhile, the European Commission has warned Ukraine it may face multi-million euro law suits if it is proven it has been syphoning off gas intended for European customers.



Europe's Energy Charter Treaty guarantees nations a right to an interrupted gas supply. It was ratified in 1994 by 51 countries, including Ukraine. According to Miller, Ukraine has been breaking several of its conditions.



A delegation from Gazprom arrived in Brussels on Thursday to discuss the ongoing dispute over gas deliveries to European countries. The Russian company brought with it a range of documents including the most recent Russian–Ukrainian transit contract. Representatives from Naftogas, Ukraine’s state-run gas company, also took part in Thursday’s consultations.



It's not the first time Russia and Ukraine have had a dispute over gas exports. At the beginning of 2006, Gazprom says, Kiev failed to pay for gas it received from Russia. In the aftermath of that row, Russia and Ukraine signed two independent contracts – one for gas transit to Europe, and a separate one for delivery to Ukraine. It was hoped these contracts would prevent future difficulties.



EU reaction



While talks were continuing in Brussels, EU prime ministers meeting in Prague were busy putting together a document called “The declaration on the Russia-Ukraine problem and energy security”.



In a change of policy, it says the EU will help settle the stand-off because it affects so many of its member states. Europe had distanced itself from what it had described as a commercial dispute.



The Czech Republic, which now holds the rotating EU presidency, refused to take sides, saying Europe had been failed by both Moscow and Kiev.



“Both Russia and Ukraine have not yet shown enough determination to solve the problem, which damages their credibility as EU partners,” said Czech Deputy Prime Minister for European Affairs Aleksander Vondra.



The EU continues to call on both Russia and Ukraine to resolve the gas row as quickly as possible. The president of the EU Parliament, Hans-Gert Poettering, insisted that “the contracts we have and the member states have are going to be fulfilled.”



He added: “The problems which are there between Russia and Ukraine must be resolved, but we cannot be the victim.”



According to Jose Manuel Barroso, the European Commission President, Ukraine must ensure free gas transit to Europe if it wants to preserve good relations with the EU:



"If Ukraine wants to be closer to the EU it should not create any problems for gas to come to the EU."



Barroso said the EU was prepared to help Russia and Ukraine find common ground in their dispute. Nevertheless, if normal gas supplies were not restored, he said, the EU would be forced to view supplies of Russian gas through Ukraine as no longer “credible”.



It seems clear that while the EU is prepared to help resolve the dispute, it is not going to act as a referee in the price war between Moscow and Kiev.



Meanwhile, speaking at his residence outside Moscow, Vladimir Putin announced that Russia is ready to pay a market price for the transit of Russian gas through Ukraine - but only if Kiev pays the market price for Russian gas - $470 per thousand cubic metres.



“Gazprom made an extremely privileged offer to its Ukrainian partners. I don’t feel comfortable pronouncing the price but I will – it’s $US 250 per 1,000 cubic metres of gas. Why do I say uncomfortable? Because consumers in Russia will ask me – why would we ever do this? Nevertheless, Gazprom made the offer and guess what? It was turned down!” Putin said.



Made worse by weather



Suffering a bitterly cold spell, Europe has been keen for Russia and Ukraine to resolve their dispute as soon as possible. Nearly two thirds of Europe’s member states have reported feeling the effects of the gas supply cut.



Some countries have coped better than others: Germany and the Czech Republic have their own gas reserves and other supply routes which allow them to handle gas shortages. Poland can bypass Ukraine by using alternative transit routes through Belarus.



Slovakia, on the other hand, was forced to declare a state of emergency because of shortages. There has even been talk of re-opening a Soviet-era nuclear power plant, the closure of which had been a requirement for Slovakia joining the EU.



Similarly, Bulgaria is experiencing significant problems, reporting that thousands of households have been left without heating in the freezing cold. Dozens of factories have also been forced to cut production.



Ukrainian officials say the country has large gas reserves, which will allow it to cope through the winter without having to rely on Russian imports. However, there have been reports of several heating stations in Kiev switching to oil instead of gas.



The gas war



The decision to stop pumping gas through Ukraine was proposed by the Gazprom CEO, Aleksey Miller, and agreed to by Russia's Prime Minister Vladimir Putin.



”It is necessary to stop delivering gas to the Russia-Ukraine border. Since transit of Russian gas through Ukraine has been fully stopped, and Ukraine is stealing Russian gas, I propose to stop pumping Russian gas to the Russia-Ukraine border,” Vladimir Putin said.



Aleksey Miller stressed that the stopping of gas transit should be done as publicly as possible and with international observers present.



Folllow the link to read Gazprom's official statement on the crisis



Gazprom said that Ukraine shut all four pipelines which send gas to Europe, causing several countries to run out of fuel. But Ukraine claims that Russia stopped delivering all gas to Europe through its territory on Wednesday morning.



Some countries in Europe have no gas stockpiled. Macedonia has less than a week’s supply and there have been talks of a possible state of emergency in Slovakia, while the situation in Greece is also described as difficult.



The number of European countries reporting a complete halt of gas supply via the Ukrainian route is still growing. Amongst those affected are Romania, the Czech Republic, Slovakia, Bulgaria, Greece, Hungary, Serbia and Austria.



Related links:



The gas row that won’t go away

Chronology of Russia-Ukraine gas war

Europe braces itself over Ukrainian gas theft

Gazprom threatens Ukraine with extreme measures

Gazprom calls on Europe to sue Ukraine

Time ticks down for Ukraine on Gazprom payment and supply for coming year

Ukraine stalls on gas debt