Deal Struck to End Gas Cutoff

Friday, January 9th, 2009 at 2:21 pm

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BRUSSELS — European officials said Friday that Russia and Ukraine had reached an agreement to send a monitoring mission to oversee gas deliveries as part of efforts to resolve a bitter row between the two countries over pricing and transit. “It is now imperative that the gas starts to flow to the European Union without any further delay,” said Ferran Tarradellas, a spokesman for the European Union’s energy commissioner, Andris Piebalgs.

In Sofia, Bulgaria, hampered by the gas dispute between Russia and Ukraine, commuters rode in an unheated tram on Thursday. The European Union said gas should flow again soon.

The agreement means that gas supplies could resume soon, perhaps as early as Friday, or more likely over the weekend, if no further hitches arise.

Russia cut off all gas deliveries through Ukraine on Wednesday after the dispute escalated, leaving European countries like Bulgaria shivering during a bitter January cold snap.

Ukraine said it would allow Russian experts to join the European Union mission to monitor gas flow through the country, The Associated Press reported from Kiev.

Valentyn Zemlyansky, spokesman for Ukraine’s state gas company Naftogaz, said members of the European Union mission would tour gas pumping stations together with the Russian experts, the A.P. reported, adding that the European Union monitors were expected to arrive in Kiev on Friday.

Russia has said it would restore supplies of natural gas through Ukraine if its officials were included in a monitoring mission.

The European Union said Thursday that gas supplies to the Continent should start flowing shortly after a deal was completed.

“This deployment should lead to the Russian supplies of gas to E.U. member states’ being restored,” the Czech government, which holds the rotating presidency of the European Union, said in a statement, The Associated Press reported.

Russia cut off the flow of gas on Tuesday as part of a pricing dispute with Ukraine, creating shortages in many European countries. The impact of the gas cuts was felt most severely in southeastern Europe, where hundreds of thousands of people in Serbia, Bosnia and Bulgaria were without heat.

Russia, which first cut off gas shipments just for Ukraine, on Wednesday cut off all gas exports to Ukraine, including those destined for Europe, saying Ukraine was diverting some gas for its domestic use.

The pricing dispute centers on Russia’s desire to sharply raise the price for the gas it sells to Ukraine, as well as Ukraine’s desire to raise the fees that it charges Gazprom to ship gas to the European Union. Gazprom is seeking to raise the price Ukraine pays for gas to $450 per 1,000 cubic meters from $179.50 last year. Ukraine has reportedly offered a little more than $200 per 1,000 cubic meters. Russia also wants to collect what it says are fines for late payments on previous shipments.

Gazprom halted all shipments to Ukraine for domestic use on Jan. 1, then stopped gas exports for transshipment through Ukraine on Wednesday, saying its western neighbor was taking gas from the pipeline meant for European customers. The cutoff left Ukraine and 17 other countries in Europe facing either no new gas supplies or a sharp reduction in the middle of winter.

In a European parliamentary committee hearing on Thursday, Evgeni Kirilov, a member from Bulgaria, which depends almost completely on Russia for its gas, said he could not understand “how two of the biggest countries in Europe can be so uncivilized and irresponsible.” He added: “We are hostage to this irresponsibility.”

Mr. Putin blamed Ukraine’s leaders for the shutoff and suggested they were unwilling to cut out a middleman company, RosUkrEnergo, owned by a business ally of the Ukrainian president, Viktor A. Yushchenko. Mr. Putin said he suspected some politicians of seeking to use proceeds from gas “as financial resources in future political campaigns.”

Speaking on Russian television on Thursday, Mr. Putin offered to raise the transit fees that Russia pays to ship gas across Ukraine, saying the two countries needed to shift, “as quickly as possible to a market relationship.” In exchange for a market rate for gas, he said, Russia would pay transit fees of $3 to $4 for each 1,000 cubic meters transported 100 kilometers, or 62 miles. Gazprom last year paid Ukraine $1.60 and had said it would pay $1.70 this year.

While there are political overtones to the dispute, most experts attribute it primarily to commercial interests. “The genesis of this is in Russia’s move away from barter agreements with the former Soviet republics toward market prices,” Andrew Neff, an energy analyst at IHS Global Insight in Ankara, Turkey, said. “You can blame either one, but both sides seem to have shot themselves in the foot.”