EU holds emergency talks on Russia-Ukraine rift
(Reuters)
Updated: 2006-01-04 09:29

The EU holds emergency talks on Wednesday to seek ways to secure energy supplies in the face of a Russian-Ukrainian gas dispute that triggered shortages earlier this week.

Russia's gas supplies to Europe returned to normal on Tuesday after European customers complained about delivery shortfalls to a wintry continent when Moscow stopped supplies to Ukraine on January 1 after Kiev rejected a fourfold hike in prices.

Russian and Ukrainian officials met but neither side signaled any softening in the standoff between the two republics which formed the industrial axis of the former Soviet Union.

Ukrainian President Viktor Yushchenko (C) speaks during a meeting on gas issues in Ukraine's capital Kiev, January 2, 2006. [AP]

With Europe highly reliant on Russia for energy, officials from the European Union's 25 member states were expected to discuss how the dispute had affected them and how they could ensure their gas needs were not disrupted in the future.

The officials were also likely to discuss a request for help in negotiations with Russia by Ukraine and Moldova, another former Soviet republic hit by Moscow's decision to raise prices.

The EU's Energy Commissioner Andris Piebalgs, who will chair the meeting, said the bloc would be interested in helping negotiations if Russia agreed. But he gave no details on what role Brussels could play.

"We expect to also establish some form of community solidarity mechanism in the case if there is a gas disruption. I don't mean in this particular case, but in general," Piebalgs told Reuters.

ACCUSATIONS TRADED

Russia's state-run Gazprom and Ukraine's Naftogaz Ukrainy gas companies have been invited to give briefings at the meeting, which will also be attended by European industry representatives and consumer groups.

Russia blames Ukraine for refusing to pay the same prices as its European neighbors and has accused Ukraine of stealing gas intended for European customers.

Ukraine says Russia is lying and accuses the Kremlin of punishing it for its pro-West ambitions.

Pipes and a pressure gauge are seen at the Solokhovskoe gasfield near the city of Poltava, 330 km (198 miles) east of Ukraine's capital Kiev, January 3, 2006. [Reuters]

The Kremlin makes no secret of its dislike of the West-leaning stand of Ukrainian President Viktor Yushchenko, who rose to power a year ago after mass protests forced a rerun of elections initially won by a Moscow-backed candidate.

European countries and the United States have accused Russia of using energy supplies as a political tool.

"We're glad to see that the (gas) flow has been resumed, and we hope that the Russians and the Ukrainians can reach some type of accommodation," said a White House spokesman.

Moscow wants Ukraine to pay $230 per 1,000 cubic metres of gas, up from the current $50 price that is rooted in Soviet-era subsidies, but Ukraine says such a big hike could wreck its weak economy.

Ukraine's gross domestic product may fall by 5 percent and inflation rise to 27-30 percent in 2006 if the price for Russian gas increases to $230, a senior government official was quoted as saying on Tuesday by Unian news agency.

The wobble in gas supplies to Europe this week sent a chill through capitals and energy markets, with some analysts saying the disruption had hurt Russia's credibility as a dependable supplier of energy.

Prices for oil, Russia's other major money earner, jumped a dollar to just over $60 a barrel as consumers feared the row could yet crimp fuel supplies to Europe.

In Britain -- Europe's only major, freely traded gas market -- wholesale prices rose as much as 8 percent on Tuesday.