WRAPUP 11-EU seeks to finalise Russian gas monitoring deal

Fri Jan 9, 2009 3:29pm EST

Related Topics

* Czech PM in Kiev to discuss deal

* EU says details of monitoring deal still to be agreed

* Ukraine says Russia trying to humiliate Kiev

* Ukraine PM sees compromise soon, says no gas stolen

* Russia says exports to resume when deal signed

By Robin Paxton and Sabina Zawadzki

MOSCOW/KIEV, Jan 9 (Reuters) - The European Union sought to finalise details on Friday of a gas monitoring deal to allow the resumption of gas supplies to Europe via Ukraine, which have been cut off for days over a pricing row.

But Ukraine made clear the continued political rancour underlying the dispute, which has closed some factories in eastern Europe and raised fears in the EU over future reliance on Russian gas deliveries.

"Those statements that have in recent days been heard from the mouth of the Russian leadership -- they are incorrrect, they humiliate Ukraine," President Viktor Yushchenko told a news briefing, apparently referring to accusations by Russian Prime Minister Vladimir Putin of high-level corruption and disarray in Kiev.

Czech Prime Minister Mirek Topolanek, representing the EU presidency, said there was agreement with Ukraine and a "similar pledge" from Russia to allow experts from either side to work in the other country under a process to monitor gas flows from Russia to Europe.

"Some technical details remain to be fine-tuned in a way to remove the last doubts and to replace a crisis of confidence with confidence that gas that the Russians want to send and Ukraine wants to transit, reaches its destination," he said after meeting senior Ukrainian officials in Kiev.

Topolanek was expected to fly on to Moscow on Saturday for talks with Putin, a spokesman for the Russian prime minister said.

The presence of monitoring missions along the transit routes for Russian gas will reassure Moscow that the gas it pumps across Ukraine is not being siphoned off by Kiev.

Moscow cited this allegation -- denied by Ukraine -- as its reason for shutting off gas through its ex-Soviet neighbour earlier this week.

"I want to declare that no gas whatsoever has been stolen by Ukraine and for that reason we are open to any kind of mission run by international institutions," Ukrainian Prime Minister Yulia Tymoshenko said, referring to the potential for monitors.

She said she expected a compromise with Russia to be found soon and a contract "will be signed and the conflict ended".

The EU gets a quarter of its gas supplies from Russia, 80 percent of which passes through Ukraine. So far, supplies to 18 countries have been disrupted by the dispute. [ID:nL546299]

Alexei Miller, head of Russia's state-controlled gas monopoly Gazprom (GAZP.MM), said Ukraine had given verbal agreement for deployment of the monitors.

"As soon as the document has been signed... and observers are ready for practical work on the gas stations, transit of gas via Ukraine will be possible," he said in a statement.

The dispute between Kiev and its former Soviet master follows tensions over Ukraine's efforts to join NATO, a move bitterly opposed by Moscow and viewed with wariness even by European members of the alliance and by investors.

Ukraine has been beset for months by political squabbling between President Yushchenko and Prime Minister Tymoshenko, his former ally, notably over ties with Russia.

The European Commission said a team of 20 observers, including experts from major gas companies and senior officials from the EU, had arrived in Ukraine and begun work.

The gas is likely to be delivered only to Europe, not Ukraine itself, since Moscow and Kiev have yet to agree a price for the gas, subsidised since Soviet times. Russia has repeatedly said Ukraine must now pay the going market rate.

MEDVEDEV SEES "PROFIT MARGIN"

Russian President Dmitry Medvedev said last year Russia sold gas to Ukraine for $179.5 per thousand cubic metres, but Ukrainian consumers paid $320.

"That profit margin went into the pockets of unknown structures, which most likely represent someone's corrupt interests," he said in remarks broadcast on Vesti-24 television.

The damaging shutdown in Russian supplies has revived calls within the European Union to find other suppliers, although real diversification cannot happen quickly as alternative pipelines do not yet have enough gas to fill them.

Hungary's Energy Minister Csaba Molnar, whose country depends on Russia for 70 percent of its gas needs, said the EU must get financially involved in the Nabucco pipeline which aims to transport Caspian gas into central Europe.

Eastern and central Europe have borne the brunt of the dispute, with many countries forced to seek gas from elsewhere or draw on their storage reserves.

The Czech Republic said it would provide about 4 million cubic metres of gas per day to its neighbour Slovakia, which declared a state of emergency over its gas supplies.

Bulgaria's state gas monopoly Bulgargaz has completely cut gas flows to 72 big industrial consumers and sharply lowered deliveries to another 153 due to limited domestic reserves.

The dispute between Kiev and its former Soviet master follows tensions over Ukraine's efforts to join NATO, a move bitterly opposed by Moscow and viewed with wariness even by European members of the alliance and by investors.

Ukraine has been beset for months by political squabbling between President Viktor Yushchenko and his former ally, Prime Minister Yulia Tymoshenko, notably over ties with Russia.

Russia cut off gas for Ukraine's domestic consumption on Jan. 1 in a row over pricing and debts. Officials from both sides met EU officials in Brussels on Thursday where the 27-nation bloc sought an end to the spat.

(For a TAKE-A-LOOK, click on [ID:nLV634765] ) (Additional reporting by Christian Lowe and Simon Shuster in Moscow, Pavel Polityuk in Kiev and Jan Lopatka in Prague; Writing by Jon Boyle; editing by Michael Roddy)

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