Russia and Ukraine assure EU gas dispute will not disrupt supply

RUSSIA AND Ukraine have assured the European Union that their deepening gas dispute will not lead to a cut in supplies to the bloc at the start of 2009.

Kremlin-controlled energy firm Gazprom has threatened to cut gas flow to Ukraine on January 1st over an alleged $2.4 billion (€1.8 billion) in unpaid fuel bills.

Gazprom said Kiev was only able to repay one-third of the debt by the end of this month, preventing the signing of a contract for gas delivery in 2009.

The warning rekindled memories of January 2006, when a price dispute prompted Gazprom to halt gas supplies to Ukraine, causing knock-on fuel shortages as far west as Italy and France.

“Both the parties have committed to respect the transit of gas to European customers,” Ferran Tarradellas, a European Commission spokesman on energy matters, said yesterday.

“The information we have received from both sides is that, whatever their bilateral commercial dispute could lead to, there is going to be no effect on supplies of gas from Russia to the European Union through Ukraine.”

The latest gas dispute with Russia arrives at an uncomfortable time for Ukraine as it deals with a plummeting currency and stock market, a sharp drop in industrial production, and political turmoil rooted in a long-running feud between president and prime minister, who blame each other for the crisis. The International Monetary Fund has already extended a $16.5 billion loan to prop up the nation’s economy.

A day after about 1,000 people rallied in Kiev to protest against a fourfold increase in public transport fees, delays in wage payments and shortages of heating and hot water in several parts of the city, Ukraine’s government and central bank traded accusations of incompetence yesterday.

“The government’s inept policies in running the economy have led to a situation in December in which the country could find itself in internal default,” the bank said in a statement.

“The government now has no funds to pay salaries, pensions and social benefits or to cover its domestic and external obligations.”