EU warns Russia not to use gas as weapon in Ukraine crisis

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KIEV: The European Union warned energy giant Russia on Tuesday not to use gas supplies as a weapon in its standoff with Ukraine over the fate of its neighbour’s separatist east.

EU Energy Commissioner Guenther Oettinger said he hoped to reach an “interim solution” with Russia over its three-month-long supply cut to Ukraine when the three sides meet for crunch talks in Berlin on Friday.

Russia halted all gas sales to the ex-Soviet nation in June after Ukraine balked at paying a higher price imposed by Moscow in the wake of the February ouster in Kiev of a pro-Kremlin president.

Ukraine still transports volumes of gas intended for Russia’s other European clients. But EU nations fear that Kiev may be forced to tap into those flows once the winter heating season begins.


“The gas sector and the energy sector as a whole should not be a political tool,” Oettinger told a forum in Kiev devoted to European energy security.

“It should not be a weapon in these difficult times, in the crisis between Ukraine and Russia and between Europe and Russia.”

Russia supplies Europe with about a third of its gas through a handful of Soviet-era pipelines and the new Nord Stream link that runs under the Baltic Sea and connects directly with Germany.

Ukraine currently transports half of the Russian gas used in European nations. But countries such as Italy receive all their Russian supplies through the Ukrainian link.

Oettinger said he hoped to reach a temporary solution to Russia’s gas dispute with Ukraine when the sides meet in Germany.

“We are checking again to come to a pragmatic solution, an interim solution, a compromise with our Russian contracting partners.”

But he hinted that EU nations may be forced to expand their current list of sanctions against Russia to include its gas sector if no quick fix is found.

“We want to avoid the worst case scenario,” said Oettinger.

“It was our and my position to avoid sanctions into… any gas industries. It is our clear preference to come to an interim solution and to get enough gas from Russia.”

The European Union banned the sale of advanced equipment to Russia’s oil companies last month.

But it stopped short of following the US lead and taking the same step against Russia’s state-held gas giant Gazprom out of fears this may prompt a retaliatory gas cut.

Ukraine has accused Russia of “economic aggression” and lodged a $6.0-billion (4.7-billion-euro) suit with a Stockholm arbitration court after Gazprom hiked its gas price to $485.50 per 1,000 cubic metres from the $268.50 it charged the ousted pro-Kremlin adminstration.

Gazprom countered with its own $4.5 billion lawsuit in the same court linked to Ukraine’s outstanding debts.

Analysts said Ukraine’s state energy company Naftogaz now pays the highest rate of any of Gazprom’s European clients.

Moscow’s VTB Capital investment bank estimates that European utilities and gas traders paid Gazprom an average of $372 per 1,000 cubic metres in the first three months of the year.

Diplomats said the European Commission was proposing a comprise that would see Ukraine pay Gazprom $385 per 1,000 cubic metres in the winter and $325 in the summer months.

But Gazprom walked away from a similar proposal just days before it shut off Ukraine’s tap.

“This is going to be a very difficult winter,” Naftogaz chief Andriy Kobolev told a Ukrainian cabinet meeting.

“We expect (Gazprom) to halt all its gas transits to Europe, which could affect our reverse flows.”

Ukraine this year began making “reverse flow” purchases that see countries such as Slovakia resell the gas they buy from Russia to Ukraine.

But these are expected to make up just a tenth of the volume Ukraine consumed last year due to pipeline limitations and these nations’ fears of a Russian lawsuit.

Russian purchases accounted for about half of Ukraine’s needs in 2013. AFP

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