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Russia’s natural gas monopoly halted sales to Ukraine in a price dispute Jan. 1 and began reducing pressure in transmission lines that also carry substantial supplies to western Europe.Ukraine’s natural gas company Naftogaz acknowledged the reduction by Russia’s Gzprom.
“Gas is not flowing at all through some transit routes, which can lead to a fall in pressure in all the pipelines and limit the overall supply of gas to Ukraine and Europe,” Naftogaz spokesman Eduard Zaniuk said. However, he said, “for the people and municipal services there will be enough gas.”

Gazprom had given Ukraine a deadline of midnight Dec. 31 to agree to pay quadruple the amount it previously paid for Russian gas, which accounts for about a third of the consumption in the country of 48 million people.

Gazprom supplies about one-quarter of the gas consumed in Europe. Most of that goes through pipes that cross Ukraine and the dispute has raised worries of widespread supply disruptions throughout much of the continent.

“There is information that Ukraine has begun siphoning off Russian gas that is designated for European users,” Gazprom spokesman Sergei Kuprianov was quoted by Russian news agencies as saying Jan. 1 evening, about eight hours after Gazprom announced it was stopping deliveries to Ukraine.

Ukrainian Prime Minister Yuriy Yekhanurov hotly denied the allegation, saying “today we are not using a single cubic meter of Russian gas.”

In Washington, U.S. State Department spokesman Sean McCormack said in a statement that “such an abrupt stop creates insecurity in the energy sector in the region and raises serious questions about the use of energy to exert political pressure.”

Supply problems to Europe could undermine Western trust in Russia’s natural gas industry, one of the keystones of the country’s economy, and tarnish Russia’s stint as chairman of the Group of Eight, which formally started Jan. 1

A Foreign Ministry statement said Russia would “strictly fulfill” its supply commitments to Europe and that “responsibility for any possible ... problems for European countries caused by the actions of Kiev will lie with Ukraine.”

The supply restrictions were felt immediately. In Hungary, which takes Russian gas that has flowed through pipes in Ukraine, major power users were asked to switch to using oil as Russian gas supplies fell by 25 percent.

The only gas being put into pipelines headed for Ukraine is intended for European customers, according to Gazprom.

The showdown has underlined the tensions between the two former Soviet republics since Ukrainian President Viktor Yushchenko — a West-leaning leader who wants to reduce Moscow’s clout in his country — defeated a Russian-backed rival in a bitter electoral battle a year ago.

The gas crisis comes as Ukraine prepares for parliamentary elections in March, in which Yushchenko’s bloc faces a strong challenge from the party of Viktor Yanukovych, who lost the presidential ballot after mass street protests forced a revote.

The Russian Foreign Ministry said Jan. 1 that Ukrainian authorities “consciously decided to ruin the talks process with the Russian side and to use the gas problem almost to create the image of an enemy with the goal of manipulating the internal political situation.”

On Dec 31, Russian President Vladimir Putin said Ukraine could continue paying the old price of $50 per 1,000 cubic meters for the first quarter of 2006, but only if Ukraine agreed by the end of the day to start paying the new price of $230 in the second quarter.

Kuprianov said Ukraine refused the offer, but Naftogaz denied that claim Jan 1.

In a statement posted on its Web site, Naftogaz said it sent a “draft agreement that envisioned a transfer to market prices after the first quarter of 2006” to Russia before midnight Dec. 31.

Gazprom has said the price increase is necessary to conform to world gas price levels.

Ukraine has not objected to a market price but wants the increase to be phased in. Yushchenko said late Dec. 30 that the most his country could pay now is $80 per 1,000 cubic meters.

Ukraine’s government has said its transit arrangements allow it to siphon off up to 15 percent of gas moving through the country. Russia says that would be outright theft.

Ukrainian officials also say the country has sufficient gas reserves to weather a Gazprom cutoff for at least several weeks but decline to specify how much is in reserve. There were no immediate reports of gas service being lost to Ukrainian homes or businesses, even as Kuprianov predicted Ukraine would suffer quick and severe effects.

The refusal “to meet our proposals for resolving the problems will have catastrophic consequences for the economy of Ukraine and, unfortunately, for the brotherly Ukrainian people,” he said.

The dispute with Ukraine has raised wide concerns that EU supplies could be affected. But Kuprianov offered assurances on Russian television that “export gas for Europe is moving at full volume.”

EU spokeswoman Mireille Thom said energy experts would meet Jan. 4 to look at the situation and discuss how European countries should react.

“We hope the two parties will find an agreement quite soon,” she said.

EU Energy Commissioner Andris Piebalgs said last week that Europe could cope with a temporary interruption to its gas supply.

Burkhard Bergmann, the head of Germany’s E.On Ruhrgas gas distributor, said Jan 1 that Russia’s move could eventually crimp supplies for industrial customers, but homeowners should not worry.

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