x Abu Dhabi, UAETuesday 25 July 2017

Russia cuts gas supply to Ukraine amid rising tensions

Ukraine has enough reserves to last until December, according to the chief of state gas company Naftogaz, but the move could disrupt Europe’s long-term energy supplies if the issue is not resolved.

MOSCOW // Russia cut gas supplies to Ukraine on Monday after negotiators failed to reach a deal on Ukraine’s unpaid gas bills and future gas prices amid deep tensions between the two neighbours over eastern Ukraine.

The decision provoked strong words from both sides but does not immediately affect the crucial flow of Russian gas to Europe. Ukraine itself has enough reserves to last until December, according to the chief of Ukraine’s state gas company Naftogaz.

Still, the Russian move could disrupt Europe’s long-term energy supplies if the issue is not resolved, analysts said. Previous gas disputes left Ukraine and some Balkan nations shivering for nearly two weeks in the dead of winter.

The gas conflict is part of a wider dispute over whether Ukraine aligns itself with Russia or with the 28-nation European Union. It comes in the midst of a crisis in relations following Russia’s annexation of Ukraine’s Crimean Peninsula in March. Ukraine accuses Russia of supporting an armed separatist insurgency in its eastern regions, which Moscow denies.

Ukraine, one of the most energy inefficient countries in Europe, has been chronically behind on payments for the Russian natural gas needed to heat its homes and fuel its industries. In addition, Russia had been giving its neighbour cut-rate sweetheart deals on gas for various political reasons, a practice that came to a halt on April 1.

Russia had demanded a payment of US$1.95 billion by Monday for past-due bills. At talks over the weekend in Kiev, Ukraine was ready to accept a compromise of paying $1bn now and more later, but Russia didn’t accept the offer, the European Commission said.

Sergei Kupriyanov, spokesman for the Russian gas giant Gazprom, said since Ukraine missed the deadline, it will have to pay in advance from now on. That’s a nearly impossible demand for the cash-strapped nation, which is fighting an insurgency and investigating possibly billions lost to corruption under its former pro-Russian president, Viktor Yanukovych.

In Kiev, Ukrainian prime minister Arseniy Yatsenyuk rejected the Russian position, putting Gazprom’s move on par with the annexation of Crimea and the pro-Russia insurgency in eastern Ukraine.

“We won’t subsidise Gazprom,” he said. “Ukrainians will not take $5bn per year [out of their pockets] to let Russia spend this money on weapons, tanks and planes to bomb Ukrainian territory.”

In Moscow, Russian Prime Minister Dmitry Medvedev, at a meeting with the Gazprom chief and other officials, called the Ukrainian position “absurd” and said it amounted to blackmail over the pipelines.

* Associated Press