Russia warns energy supplies to Europe at risk in Ukraine dispute

Dec 22, 2008, 11:16 GMT

Moscow - Russian gas export monopoly Gazprom Monday warned European customers of a potential shortage in gas supplies, as it has hit a deadlock in a pricing dispute with Ukraine.

'We cannot rule out that the present position of the Ukrainian party and possible steps it may resort to - linked to gas transit through Ukrainian territory - could lead to a disruption in the stability of supplies to Europe,' Gazprom chief Victor Zubkov, who also holds the post of first deputy prime minister, said in a statement to customers.

Gazprom last week threatened to cut gas to Kiev on January 1 over the matter of 2-billion-dollars in outstanding debt, which the country is struggling to pay back before the end of year.

European customers fear a similar situation to the breakdown in talks between Gazprom and Ukraine's NAftogaz in 2006 that led to fuel shortages and a price-spike across the continent in the dead of winter.

Ukraine's 'foot-dragging' in addressing the problem, Zubkov added, 'is especially puzzling given the International Monetary Fund's decision to lend Ukraine 16.5 billion dollars to stem its deficit and help it balance the budget and support the country's banking sector.'

Zubkov said Gazprom has proposed to allow Kiev to redeem the debt by discounting its transit fees in 2009. Over 80 per cent of Russian gas exports cross Ukraine to Europe.

'So far, no solution has been found because of the non- constructive position of the Ukrainian party,' he was quoted by news agency Interfax as saying.

Gazprom alerted clients and European Union member-states in a letter of warning sent Monday.

The President of Belarus meanwhile was in Moscow on Monday to negotiate a deal on energy prices by ceding possible political prizes and shares in its national transit monopoly to Moscow. Belarus is another of Moscow's key export routes.