By Daryna Krasnolutska
Jan. 6 (Bloomberg) -- Russia reduced natural gas shipments to Europe through Ukraine and deliveries to the Balkans were cut at the Romanian border as a dispute over pricing and transit fees led to a sixth day of supply disruption.
OAO Gazprom, the Russian gas exporter, cut gas shipments to Europe through Ukraine to 92 million cubic meters, less than one third of normal levels, NAK Naftogaz Ukrainy spokesman Valentyn Zemlyanskyi said. Russian gas supplies to Bulgaria, Turkey, Greece and Macedonia were cut at the Ukrainian-Romanian border, Bulgaria’s Energy and Economy Ministry said.
The moves came after Russia and Ukraine agreed yesterday to restart talks on their dispute and as Gazprom warned that Ukraine risks amassing a debt of “billions of dollars” if the conflict continues. Russia, which supplies a quarter of Europe’s gas, cut shipments to Ukraine on Jan. 1, in a repetition of a 2006 dispute which also interrupted supplies to Europe.
“It’s not in the interest of either side for it to drag on and cause a larger drop in supplies,” said Chris Weafer, chief strategist at UralSib Financial Corp., by phone from London yesterday. “The risk of a more substantial pressure drop elsewhere in the pipeline system increases if supplies are cut for more than 10 days.”
Gazprom Chief Executive Officer Alexei Miller told Russian Prime Minister Vladimir Putin in a meeting yesterday that Gazprom intends to reduce gas deliveries to the Ukraine border by 65.3 million cubic meters a day, equivalent to the amount it says Ukraine has taken out of the system. Ukraine denies siphoning the fuel, saying some is needed to keep pipelines operating.
Gazprom Demands
“If this continues then the debt will soon come to billions of dollars,” Miller said. Gazprom says it is still owed $614 million for 2008 supplies, even after it receives a $1.5 billion payment, a claim Ukraine rejects.
Gazprom raised its demands on Jan. 4 as Miller cited a possible price of $450 per 1,000 cubic meters for deliveries to Ukraine this month, reflecting the average price in countries bordering Russia’s neighbor. Ukraine paid $179.50 for its Russian gas last year and says $201 would be fair in 2009.
The European Union sought to help defuse the conflict, sending a delegation headed by Czech Industry Minister Martin Riman for talks with Ukrainian officials. They will meet with Ukrainian Energy Minister Yuriy Prodan, Oleh Dubina, head of state energy company NAK Naftogaz Ukrainy, and presidential advisers at 10 a.m. today, according to Bohdan Sokolovskyi, President Viktor Yushchenko’s energy aide.
“We have a mission in the region,” European Commission President Jose Manuel Barroso told reporters yesterday in Lisbon. “I hope the situation will be resolved.”
Gas Diplomacy
Ferran Tarradellas Espuny, a spokesman for the European Commission, the EU executive in Brussels, said the EU delegation would also meet Gazprom officials in an unspecified EU capital today.
Espuny told a press conference yesterday Russia’s cutoff of gas shipments to Ukraine was a “commercial dispute” that must be solved bilaterally.
“It has to be resolved by the two parties,” he said. “We’re putting pressure on to encourage both countries to go to the negotiating table, because it’s in our interest,” though the EU is “not acting as an intermediary.”
U.K. gas for immediate delivery gained 8.7 percent to 59.35 pence a therm at 4:44 p.m. London time yesterday, according to broker ICAP Plc. That’s equal to $8.66 a million British thermal units. A therm is 100,000 Btus. Gas for tomorrow rose 6.6 percent to 60.75 pence. U.K. gas for delivery next month rose 3.2 percent to 57 pence.
“I’m really surprised that the negotiations haven’t been settled,” said Alexander Rahr, director of Russian Programs at the German Council on Foreign Relations. “Both sides are being very stubborn.”
To contact the reporters on this story: Daryna Krasnolutska in Kiev on dkrasnolutsk@bloomberg.net:
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