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Last Updated: Saturday, 31 December 2005, 11:44 GMT
Clock ticks away on Ukraine's gas
Ukrainian villager closes a valve on a gas cylinder
Ukraine says the dispute will not hit households
Time is running out for Ukraine to strike a price deal to avert Moscow's threat to begin the New Year by turning off gas supplies to its neighbour.

Russia's Gazprom, which provides 30% of Ukrainian gas, wants to replace the current barter system with market rates for gas and pipeline transit fees.

The four-fold price hike is unacceptable to Ukraine - the main route for Russian gas to the West.

Both sides show no sign of relenting before the 0700 GMT Sunday deadline.

Ukraine's pro-Western President, Viktor Yushchenko, went on national television networks on Friday evening to defend his position, saying he hoped that his personal good relations with his Russian counterpart, Vladimir Putin, would resolve the dispute.

Ukraine: US$230
Belarus: US$47
Armenia and Georgia: US$110
Romania: US$280
Average EU charge: US$240
source: AP news agency

His appeal earlier in the day for a 10-day stay of execution was rejected immediately by Gazprom.

The company has invited Russian TV cameras to its headquarters in Moscow to broadcast the gas supply shutdown live in special news bulletins on one of the biggest holidays in the former Soviet Union.

Many in Ukraine believe Russia's moves are politically designed to manufacture a crisis over energy supplies, the BBC's Damian Grammaticas reports from Moscow.

They believe Mr Putin wants to punish Ukraine for its so-called Orange Revolution and moves to join the European Union and Nato, leaving Russia's sphere of influence, our correspondent adds.


Ukrainian gas industry officials have said the country's heating needs over the harsh winter can be met from domestic production but supplies to industrial customers may have to be reduced.

Central and eastern Europe's gas pipeline network

Justifying his rejection of the Russian price hike, Mr Yushchenko said that he did not want to believe Russia was using gas as a lever to put pressure on his country.

"That frankly humiliates us as a negotiating partner," he said.

However, Gazprom, he argued, was varying the price of its gas according to customer and he contrasted the $47 Belarus - a close ally of Moscow - would be expected to pay per 1,000 cubic metres with the $230 being asked of Ukraine.

"A price of $230 is unacceptable not because it is high but because there are no economic grounds for it," he said.

Adding to the pressure, former Prime Minister Yulia Tymoshenko - a leading figure in the Orange Revolution - said that anyone who agreed to the new market prices would be a "traitor to Ukraine".

Ukraine, which currently pays $50 per 1,000 cubic metre, has said it is prepared to phase in world prices gradually and can only raise its payment to about $80 for now.

It links this figure to Gazprom's offer to raise the pipeline transit fee it now pays - $1.09 per 1,000 cubic metre per 100km - to about $1.8. Ukraine has been asking for at least $2.

'No disruption'

Russian gas is expected to fetch on average about $240 in the European Union next year, according to analysts.

Gazprom said it had a "detailed plan" in place to ensure gas supplies transiting Ukraine would not be disrupted, and said any attempt by Ukraine to siphon off gas would be "theft".

With Russia supplying about a fifth of the EU's gas, the European Commission said it was "confident" the dispute would not lead to a shortage in the short term.

Even if some supplies were interrupted, it added, "the level of gas stocks and supplies from other areas" would cover this.

President Putin has offered Ukraine credit worth $3.6bn to cover the new gas cost but this was rejected by Kiev.

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20 Dec 05 |  Business

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