Ukraine warns Europe may face gas shortages

KIEV - A top Ukrainian official warned yesterday that European customers could see serious natural gas disruptions in about two weeks if the energy dispute between Russia and Ukraine is not resolved, and the Russian gas monopoly Gazprom accused Ukraine of boycotting contract negotiations.

As Russia and Ukraine traded accusations in their bitter dispute over energy prices, four European nations - Romania, Hungary, Poland, and Bulgaria - all reported some supply drops in natural gas yesterday.

Gazprom cut off gas shipments to Ukraine on Thursday. Then Gazprom and Ukraine embarked on dueling charm offensives, both trying to assure western European nations that they were reliable energy partners and the fault lay with their rival.

The Russian delegation hoped to convince investors in Prague, Paris, Berlin, and London that Kiev is to blame for any gas shortages, saying Ukraine is siphoning off natural gas from Russian shipments, as well as refusing to pay $600 million in fines or negotiate a new price contract for 2009.

Russia supplies Ukraine with natural gas and also sends 80 percent of its gas supplies to Europe through pipelines in Ukraine. The stakes in the dispute are high because Europe relies on Russia for a quarter of its gas needs and because heat is crucial in the biting northern European winter.

Meanwhile, Bohdan Sokolovsky, an economic aide to President Viktor Yushchenko of Ukraine, warned that serious disruptions could hit Russia's European customers, if Russia continues to refuse to ship gas allocated for Ukraine to Ukraine. Sokolovsky said even though Ukraine continued to pump Russian gas destined for Europe, European countries could see major shortfalls in 10 to 15 days.

Without Ukraine's share of gas in the shipment from Russia, the overall gas levels in the pipeline transit system begin to fall. Sokolovsky said if that continues, an automatic shutdown will be triggered because the system requires a minimum amount of gas to maintain pipeline pressure.

"It is obvious that this is political pressure on Ukraine," Sokolovsky said of Russia's gas cutoff. "This is pure politics."

Speaking in Prague yesterday, Gazprom Deputy Chairman Alexander Medvedev said Ukraine's position was "absolutely unacceptable." "We're not negotiating. There's nobody from Naftogaz to negotiate" with, he said, referring to Ukraine's state gas company. Despite the gas cutoff to Ukraine, Gazprom says it has continued pumping the gas meant for Europe. Medvedev said Gazprom has been using alternative routes that don't cross Ukraine - pipelines in Belarus and Turkey - but those don't have the capacity to make up the shortfall. As a result, some European countries were seeing a reduction in supplies.

"We try to do our utmost to compensate for what Ukraine is doing . . . but the capacity to compensate has its limits," Medvedev said. Gazprom Alexei Miller later suggested at a televised company meeting in Moscow that European consumers should sue Ukraine for allegedly stealing their gas.

Ukraine, meanwhile, disputes the fines and contends that Gazprom is unfairly refusing to accept a rise in transit fees while asking for higher gas prices for 2009. Gazprom CEO Alexei Miller said in a statement late yesterday that the company would file a lawsuit with the Court of Arbitration in Stockholm against Naftogaz over the transit issue. The two nations also are at odds over the price Ukraine will pay for natural gas in 2009. Gazprom has proposed a price jump from $179.50 to $418 per thousand cubic meters.

Valentyn Zemlyansky, a Naftogaz spokesman, said yesterday the company is ready to negotiate in Moscow but called Gazprom's behavior "energy blackmail." He rejected the claim that Ukraine was siphoning gas, saying the country had been sacrificing its own reserves to maintain minimum pressure levels in the pipes.