Russia "excessively harsh" in gas row -IEA

By Muriel Boselli

PARIS (Reuters) - The International Energy Agency said on Tuesday Russia's use of supply cuts to resolve a gas payments row with Ukraine was "excessively harsh" and urged the two countries to settle the dispute in a more commercial way.

Russia halved gas deliveries to Ukraine on Tuesday, while Kiev's state gas company hinted it could take supplies from transit pipelines flowing Russian gas to Europe if it ran short of domestic supplies.

"The technique of cutting off supplies to achieve those higher prices is excessively harsh," said Ian Cronshaw, the head of energy diversification division at the IEA, which is the energy adviser to 27 industrialized countries.

"We would hope that the dispute would be settled in a more commercial way," Cronshaw told Reuters in a telephone interview.

He cited ordinary dispute settlement procedures included in contracts as an example.

"It might also involve some neutral arbitration party or, at a final stake, some neutral auditing," he added.

A similar dispute between Moscow and Kiev at the start of 2006 disrupted supplies to Europe, triggering a political crisis and raising questions on the reliability of Russia as a secure gas supplier. Almost a quarter of Europe's gas comes from Russia and most of this is piped via Ukraine.

"We have been somewhat concerned by the Russia-Ukraine commercial arrangements for some time," Cronshaw said.

"These arrangements lack transparency, they contain intermediaries, which for us ought to be removed."

Ukraine and Russia's gas export monopoly Gazprom said deliveries to Europe were running normally. But the European Union voiced concern and urged both sides to "quickly find a definitive solution to this commercial issue".

Cronshaw said Russia had been a reliable supplier for a number of decades and hoped a dispute between the two parties would not affect third party consumers.

(Reporting by Muriel Boselli, editing by Anthony Barker)