Gazprom warns of European gas delivery cut

Uchenna Izundu
International Editor
LONDON, Dec.22 -- Europe's gas supplies could be disrupted because of OAO Gazprom's dispute with Ukraine over unpaid bills, the company's chairman warned.

Gazprom is seeking $2.4 billion from Ukraine's state gas company Naftogaz and warns that if the dispute is not resolved by Jan. 1, then Gazprom could halt gas supplies.

Russian media reported Chairman Viktor Zubkov, who is also Russia's first deputy prime minister, said: "We cannot rule out that the position of the Ukrainian side and its certain steps, which are linked to gas transit through Ukrainian territory, could lead to a disruption of supply stability to Europe."

Andris Piebalgs, EU energy commissioner, is prepared to travel to Moscow for emergency talks with the Russians. "I am very worried," he said.

Gazprom Chief Executive Officer Alexei Miller told European customers Gazprom has been helping and continues to help its Ukrainian partners as much as possible.

"Taking into account the foregoing risks caused by the Ukrainian side's noncompliance with its contractual obligations, I would nevertheless like to assure that OAO Gazprom will fulfill all of its contractual obligations to its European partners in full," he wrote.

Ukraine wants to pay $100/Mcm for Russian gas in 2009, while Gazprom is demanding international prices of $250/Mcm to $300/Mcm. Protracted negotiations continue

Russia's warning of a gas shortage comes 24 hr before it hosts a meeting of the world's major gas suppliers to formalize a production cartel that Western consumers are worried could boost energy prices.

Ukraine is in a financial crisis where its currency has lost 4% of its value since September due to a drop in steel exports, and there has been a major loss of confidence in the banking system. Political infighting has crippled the country, but the International Monetary Fund has given the government a multi-billion loan to bail it out.

In January 2006, Gazprom cut supplies briefly to Ukraine, a major transit country to the European Union, following its argument over an increase of gas prices. Several EU countries were affected, and the move prompted European policymakers and politicians to look for alternative gas suppliers as Russia provides 25% of the EU's gas needs.

Contact Uchenna Izundu at uchennai@pennwell.com

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