Russia and Ukraine to resume gas talks

Russian and Ukrainian officials aimed to resume negotiations tonight on resolving a price dispute that led to a cut-off of Ukraine’s natural gas supply, but Russia gave no indication it was in the mood for compromise.

Russia stopped selling natural gas to the neighbouring country of 48 million on Sunday after Ukraine rejected its demand for a more-than-fourfold price increase.

The dispute has raised anxiety throughout Europe, which gets about a quarter of its gas from Russia, some 80% of that amount coming in pipelines that cross Ukraine.

European customers yesterday reported supply falloffs, after which Russia boosted the amount going into Ukrainian pipelines; supplies in Europe appeared to be returning to normal on Tuesday.

State gas monopoly Gazprom claims it had to boost the amount because Ukraine is stealing Europe-bound gas. Ukrainian officials hotly deny that.

Officials from Ukraine and Moldova, which also has not signed a contract for Russian gas this year, were headed for Moscow on Tuesday for talks, Gazprom spokesman Sergei Kupriyanov said.

But earlier, he said Gazprom’s position was firm. “We have no further intention for compromise,” he was quoted as saying by the ITAR-Tass news agency.

Russia previously had offered to arrange loans for Ukraine to cover the higher gas costs and later proposed allowing Ukraine to continue to pay the old price for the first three months of the year if it agreed to the price spike thereafter.

Russia says the new price demand – £115 per 1,000 cubic metres against last year’s £25 – is justified by world market conditions.

Ukraine says it’s willing to adjust to market prices, but says the sudden hike would cripple its economy and wants an increase phased in gradually.

Russia last year supplied about a third of the gas consumed in Ukraine.

Both sides today appealed for help from the European Union – of which neither country is a member.

Russian Prime Minister Mikhail Fradkov called on EU member nations to put pressure on Ukraine to ensure that natural gas transiting the country reaches Europe.

In a message to the EU presidency, which Austria took over this week, Fradkov appealed for the bloc to press “the Ukrainian side with the aim of returning it to the sphere of law,” the RIA-Novosti news agency reported.

Ukrainian President Viktor Yushchenko and Moldovan President Alexander Voronin asked the EU to mediate, saying ”it is impossible not to see a scenario aimed at energy pressure and blackmail aimed at disrupting the economic development of our two countries,” according to a statement from the Ukrainian Foreign Ministry.

In the past year, both Ukraine and Moldova have turned toward the West politically, and many observers believe the gas price demands are at the heart of a Russian strategy to punish them.

The dispute has ignited harsh statements on both sides that underline Ukraine’s resentment of its historical domination by Russia.

Ukrainian Deputy Foreign Minister Anton Buteiko was quoted by news agencies as saying Monday that “All empires break up sooner or later ... and therefore the Russian Empire will also break up.”

An angry Russia called Ukrainian charge d’affaires Leonid Osvolyuk to the Foreign Ministry to protest Tuesday. “His excursion into history and prediction regarding the future of Russia is seen as odd for a diplomat of such high rank and is considered inadmissible,” a ministry statement said.

Although European countries including Austria, Slovakia and Hungary reported their gas supplies had returned to normal Tuesday, the gas fight has reawakened European fears over Russia’s reliability and potential for belligerence - criticism that comes as the country assumes the chairmanship of the Group of Eight, a position it wants to use to boost its international prestige.

Ukraine has not reported any cuts in gas service yet and has claimed it has enough gas in reserve to weather the crisis for weeks.

Yet uncertainty hovers around the gas it gets from Turkmenistan, which has been the country’s single-biggest supplier. Those shipments must pass through Russia, which suggested that its own orders from Turkmenistan would take priority over transit shipments to Ukraine.