Worried EU states to fly to Moscow over gas row

MOSCOW/KIEV Tue Jan 13, 2009 6:09pm EST

1 of 21. Bosnians warm themselves by the gas-fueled flame of a monument after the flow of gas returned in central Sarajevo, January 13, 2009.

Credit: Reuters/Danilo Krstanovic

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MOSCOW/KIEV (Reuters) - Russia and Ukraine faced another day of sparring over gas supplies on Wednesday and two European Union states launched fresh diplomacy to end a dispute that is weighing heavily on their economies.

Russia began pumping gas meant for Europe via Ukraine on Tuesday for the first time in nearly a week. But the EU said little or no gas was flowing to countries suffering urgent energy shortages.

Russia accused Ukraine of shutting off gas to Europe, but Kiev said there was not enough pressure in the pipeline system.

The crisis has disrupted supplies to some 18 countries at the height of winter, shutting down dozens of factories in southeast Europe.

Two of the worst hit EU states, Bulgaria and Slovakia, were sending their prime ministers to Moscow and Kiev on Wednesday in fresh efforts to get gas supplies restored.

Bulgaria's Sergei Stanishev and Slovakia's Robert Fico, were due to see Russian Prime Minister Vladimir Putin in Moscow and Ukrainian Prime Minister Yulia Tymoshenko in Kiev. It was not clear which capital they would visit first.

Stanishev is under pressure to secure supplies for his country of 7.6 million people as limited domestic reserves are dwindling and anger among Bulgarians is mounting against his Socialist-led government.

Slovakia, which has a population of 5.4 million and gets almost all its gas from Russia, declared a state of emergency on January 6, under which gas deliveries to large clients were reduced. About 1,000 companies were forced to shut or cut production.

A deal brokered by the EU, which gets a quarter of its gas from Russia, had been intended to get supplies moving on Tuesday, with international monitors in place to ensure that Ukraine was not siphoning off any gas, as Moscow has alleged.

The Russian state-controlled gas monopoly Gazprom.declared force majeure on gas exports to Europe, meaning circumstances beyond its control prevented it from meeting its obligations to clients.

Ukraine told the EU there were "technical difficulties" in that the pressure of gas from Russia was too low.

Gazprom is demanding Kiev hand over $614 million for unpaid gas bills and pay $450 per 1,000 cubic meters of gas in 2009. That is similar to rates paid by EU customers but a big rise on last year's price of $179.5.

Analysts in Kiev say Ukraine, saddled with debt and hard hit by the global slowdown, cannot afford that price.

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The row, which has dented the reputation of both Moscow and Kiev as energy suppliers, also reflects their poor political relations. Moscow is vehemently opposed to moves by Ukraine's pro-Western leadership to join the U.S.-led NATO alliance.

The European Commission said Europe needed the gas urgently and an aide to Commission President Jose Manuel Barroso said on Tuesday that he had expressed disappointment over the low volumes pumped by Russia in a telephone conversation with Putin.

Gazprom's Deputy CEO Alexander Medvedev accused the United States of pulling the strings. "It looks like ... they (Ukraine) are dancing to the music which is being orchestrated not in Kiev but outside the country," he said.

State Department spokesman Sean McCormack rejected the charge as "totally without foundation."

Russia cut off gas to Ukraine on January 1 after failing to reach agreement with Kiev on gas fees. A week later it halted all transit flows to Europe via Ukraine, saying Ukraine was stealing gas intended for Europe. Kiev accused Moscow of using energy blackmail.

Ukraine's economy -- based on steel and chemical exports -- has been hit hard by the global slowdown and its hryvnia currency has experienced sharp falls. Analysts predicted the Ukrainian national currency would slide further in trading if the gas row continued.

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