Page last updated at 07:50 GMT, Thursday, 1 January 2009

Russia-Ukraine gas talks collapse

A Ukrainian gas holding station in Mryn, 130km from Kiev, 16 December
Much of the EU's gas from Russia arrives via Ukraine

Talks to resolve a gas supply row between Ukraine and Russia have failed, raising fears of possible energy shortages across Europe.

Russia's contract to supply gas to Ukraine expired at 0700 GMT, and a Gazprom spokesman promised an announcement later in the day.

Russian Prime Minister Vladimir Putin earlier said that Ukraine would block supplies to Europe if no deal was done.

Ukraine denies owing money to Gazprom, and says it has guaranteed gas transit.

The European Commission said Ukrainian Prime Minister Yulia Tymoshenko had given her assurances that there would be "no disruption of gas supplies to clients in the European Union".

Europe's gas pipeline network

"The debt to Gazprom for gas supplied earlier was not paid. Despite verbal statements from Kiev, Gazprom did not see any money in its account," said Gazprom's chief executive Alexei Miller in a live television briefing.

He criticised Ukraine's stance during the negotiations as "unconstructive", and said Gazprom had no legal reason to continue supplying gas to Ukraine.

Mr Miller said the contract to supply gas depended on the full settlement of 2bn in gas bills and late-payment fines levied by Gazprom.

He also suggested that Kiev was seeking to provoke a wider dispute, saying he was "forming the impression that there are political forces in Ukraine which are very eager to see a gas conflict between our two countries".

A similar row between Gazprom and Ukraine in 2006 led to gas shortages in several EU countries.


A spokesman for Ukrainian state energy firm Naftogaz, Valentin Zemlyansky, confirmed that the negotiations were over.

Naftogaz said it has paid $1.5bn (1bn) in outstanding bills to RosUkrEnergo - a Switzerland-registered gas trading company which is acting as an intermediary - but not the fines imposed by Gazprom.

Alexei Miller (file image)
Gazprom's Alexei Miller said he blamed Ukraine entirely for the situation

"Europe will receive all the gas Russia supplies it with," the agency quoted Bogdan Sokolovsky, the Ukrainian president's representative on energy issues, as saying.

Gazprom is the world's largest gas producer and supplies a quarter of the European Union's gas needs, or 42% of the EU's gas imports, much of it via Ukraine.

Russia's Vladimir Putin had earlier warned Ukraine not to disrupt the transit of gas to Europe.

He warned of "very severe consequences" for Ukraine in terms of its relations with both Russia and European countries.

Mr Putin said Gazprom had been generous in offering Ukraine a price of $250 per 1,000 cubic metres of gas in 2009, given that the price in Europe was currently more than $500.

He said he understood that Ukraine was in "a difficult economic situation" which was worse than Russia's, but put the dispute down to a "war of the clans" between the Ukrainian Prime Minister, Yulia Tymoshenko, and President Viktor Yushchenko.

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