2 Jan 2009

Russia cuts off gas to Ukraine

7:29 am on 2 January 2009

Russia has cut off the gas to its neighbour Ukraine on Thursday after a contract dispute but increased supplies to other European states to try to reassure customers worried about possible disruption.

The European Union, which receives a fifth of its gas from pipelines crossing Ukraine, urged further negotiations to resolve the dispute.

Energy firms in Germany, France, Romania, and Austria said they had not seen any drop in supply from the Russian cut-off.

They said Europe has enough gas stockpiled to manage without Russian gas for several days, though not weeks.

Ukrainian President Viktor Yushchenko said in a statement he wanted to resume talks with Moscow to settle a row over payment arrears and gas prices for 2009, and was hopeful a compromise could be reached by 7 January.

Signalling a possible way out of the stand-off, Ukraine's state energy firm Naftogaz increased the amount it said it was prepared to pay for Russian gas to $US235 per 1,000 cubic metres, $US15 short of the amount Russia has demanded.

The EU is keen to avoid a repeat of a January 2006 row when Moscow cut off supplies to Ukraine, causing a brief fall in gas deliveries to other parts of Europe in mid-winter.

Russian gas export monopoly Gazprom halted the supplies to Ukraine after a failure to agree terms for supplying gas in 2009.

Ukraine's Naftogaz said it had seen a reduction of pressure in its pipelines, and was pumping gas from its stockpiles, which it says are sufficient to last it several months.