Russia, Ukraine remain locked in gas dispute

MOSCOW: Russia and Ukraine were locked in a gas dispute on Wednesday after Moscow cut 50 percent of supplies to the neighbouring state, leading Kiev to warn of possible disruption for the European Union.

Late on Tuesday the Russian gas monopoly Gazprom said that if Kiev did not return to the negotiating table Moscow could make a further reduction in gas supplies to the ex-Soviet neighbour, in addition to a 50 percent cut already implemented over Monday and Tuesday.

The dispute centres on a $600 million (395 million euro) debt that Gazprom claims from the western neighbour.

Ukraine's Prime Minister Yulia Tymoshenko has been insisting on the abolition of a murky intermediary company that has been handling Ukrainian payments for gas from both Russia and ex-Soviet Turkmenistan, RosUkrEnergo.

She has also regularly insisted on a review of prices paid by Russia for transit of gas across Ukrainian territory to EU nations to the west.

Tymoshenko was to give a news conference later on Wednesday. Ukraine is the main transit route for Russian supplies to the EU. Ukraine's state energy monopoly Naftogaz has said it is ready for further talks but also warned on Tuesday that it may have to divert some Russian gas earmarked for Europe.

On Wednesday Yushchenko was to visit the energy-rich Central Asian state of Kazakhstan, with which Kiev is keen to build ties in order to reduce its dependence on Russian energy.

Ukraine's warning of disruption to European supplies prompted concern in the EU, echoing as it did a 2006 dispute that led to disruption in several EU countries.

The European Commission, which has urged the two sides to resolve the dispute, called a special meeting of its gas coordination group for March 11 "to ensure a fully coordinated EU response to the situation."

While Naftogaz earlier said it had sufficient reserves to hold out for a month, Russia's Vremya Novostei newspaper predicted a further cut by Gazprom would threaten Ukrainian industry and force Kiev "to steal fuel from the transit flow to Europe."

The Gazeta newspaper said the EU might put pressure on Ukraine to seek a compromise, Brussels having more "levers" of influence on the Westward-leaning Ukrainian leadership.

The paper also quoted energy expert Tamara Kasyanova as predicting that the row would help stimulate the EU to develop alternative pipeline routes bypassing Ukraine.

This might mean pushing forward the Nabucco pipeline project intended to bypass Russia and bring gas from the Caspian Sea area.

But the more likely result was greater EU support for two Russian pipeline projects, South Stream and Nord Stream, which are seen by Moscow as a way of bypassing east European transit states, the paper said.

The conflict "should again demonstrate the unreliability of the gas route through Ukraine and increase pressure for alternative routes," Gazeta said.