Business | Oil & Gas

Russia-Ukraine spat hits Europe

Russia's natural gas dispute with Ukraine worsened, shutting off fuel shipments to Europe for the first time in three years and driving energy prices higher.

  • Bloomberg
  • Published: 23:58 January 6, 2009
  • Gulf News

  • Image Credit: Reuters
  • A Transgaz operator near a pressure gauge at a Romanian gas distribution station near Bucharest.

Moscow: Russia's natural gas dispute with Ukraine worsened, shutting off fuel shipments to Europe for the first time in three years and driving energy prices higher.

Russia and Ukraine blamed each other for the cuts as gas shipments from OAO Gazprom through Ukraine plummeted and deliveries to the Balkans were halted at the Romanian border.

The dispute, a repetition of a 2006 conflict, caused UK gas for immediate delivery to jump as much as 18 percent and led Bulgaria to call for emergency limits on fuel use.

Three years ago Russia turned off all Ukrainian gas exports for three days, causing volumes to fall in the European Union, while it also cut shipments by 50 percent in March during a spat over debt.

"Gazprom does not have much of a pressure mechanism left except for further cuts," Eugen Weinberg, senior commodity analyst at Commerzbank AG in Frankfurt, told Bloomberg Television. He said Ukraine is in a "comfortable" position. "Their gas reserves are enough for them to keep functioning."

Gazprom deputy chief executive officer, Alexander Medvedev, said Ukraine shut three export pipelines and said "unilateral action of the Ukrainians" caused the shortfall.

NAK Naftogaz Ukrainy spokesman Valentyn Zemlyanskyi said Gazprom cut shipments to Europe through Ukraine to 74 million cubic metres, compared with about 300 million normally.

The moves came after Russia and Ukraine agreed yesterday to resume 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 January 1. Naftogaz chief executive officer Oleh Dubina said he would travel to Moscow tomorrow for talks on the dispute.

Russian gas flows to Bulgaria, Turkey, Greece and Macedonia were halted at the Ukrainian-Romanian border, Bulgaria's Energy and Economy Ministry said.

Gas shipments at the Ukraine-Romanian border were stopped yesterday, the Bulgarian ministry said. Gazprom pumps 17.8 billion cubic metres of gas a year through Bulgaria to the four countries under a 30-year contract signed in 2006. Bulgaria consumes about 3.5 billion cubic meters of that volume.

Bulgaria raised supplies from its only gas storage facility at Chiren today to 4.3 million cubic meters and called for emergency measures, the ministry said. Russian gas flows through Ukraine and then Romania to the southern Balkan states.

UK natural gas for immediate delivery gained 18 per cent to 70 pence a therm, a two-month high, as of 10.11am London time (1.11pm, UAE time), according to broker Spectron Group Ltd.

That is equal to $10.29 (Dh37.78) a million British thermal units. A therm is 100,000 Btus. Gas for today climbed 14 per cent to 69 pence. Gas for delivery today jumped 15 per cent, also to 70 pence a therm.

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