Ukraine lets Russian observers in

January 10, 2009, 14:12
The EU has confirmed that Ukraine will allow Russian observers to oversee the transit of Russian gas through its territory. Moscow says it will resume European supplies only when it is sure Kiev won't hinder them, but Gazprom says there's been no breakthrough. The two sides are still trying to reach an agreement on price and transit security. EU observers are expected in Ukraine on Friday to discuss monitoring the gas transit to Europe.

On Thursday, negotiations in Brussels aimed at resuming Russian gas supplies to Europe via Ukraine broke up without agreement. The talks appear to have stumbled over the issue of who should be included in the international group sent to Ukraine to monitor the transit of gas.

Before the talks the EU and Kiev reached a bilateral agreement for European observers to travel to the country. However, Russia's Gazprom insisted company representatives should be included, a demand Kiev flatly rejected.

The aim of the inspectors is to make sure that no Russian gas is siphoned off once the flow restarts.

Gazprom CEO Aleksey Miller has blamed Ukraine for the failure of the negotiations.
“Ukraine has blocked the signing of the document to create a transit monitoring mission that would include experts from Europe and from Gazprom. We had a chance to resume supplies on Thursday but it didn’t happen. It’s Ukraine that should be held responsible for that failure,” Miller said.

Meanwhile, the European Commission has warned Ukraine it may face multi-million euro law suits if it is proven it has been syphoning off gas intended for European customers.

Europe's Energy Charter Treaty guarantees nations a right to an interrupted gas supply. It was ratified in 1994 by 51 countries, including Ukraine. According to Miller, Ukraine has been breaking several of its conditions.

Ukraine, however, has a different view of the situation. The country’s foreign ministry says it is aware of Ukraine’s responsibilities as a transit country, but claims it’s Gazprom that's making the transit ‘impossible’.

”Russia is now trying to hurt Ukraine’s reputation as a reliable transit country,” the ministry’s statement said. However, Kiev failed to explain how exactly Gazprom is hampering the transit.

A delegation from Gazprom arrived in Brussels on Thursday to discuss the ongoing dispute over gas deliveries to European countries. The Russian company brought with it a range of documents including the most recent Russian–Ukrainian transit contract. Representatives from Naftogas, Ukraine’s state-run gas company, also took part in Thursday’s consultations.

It's not the first time Russia and Ukraine have had a dispute over gas exports. At the beginning of 2006, Gazprom says, Kiev failed to pay for gas it received from Russia. was hoped these contracts would prevent future difficulties.

EU reaction

While talks were continuing in Brussels, EU prime ministers meeting in Prague were busy putting together a document called “The declaration on the Russia-Ukraine problem and energy security”.

In a change of policy, it says the EU will help settle the stand-off because it affects so many of its member states. Europe had distanced itself from what it had described as a commercial dispute.

The Czech Republic, which now holds the rotating EU presidency, refused to take sides, saying Europe had been failed by both Moscow and Kiev.

“Both Russia and Ukraine have not yet shown enough determination to solve the problem, which damages their credibility as EU partners,” said Czech Deputy Prime Minister for European Affairs Aleksander Vondra.

The EU continues to call on both Russia and Ukraine to resolve the gas row as quickly as possible. The president of the EU Parliament, Hans-Gert Poettering, insisted that “the contracts we have and the member states have are going to be fulfilled.”

He added: “The problems which are there between Russia and Ukraine must be resolved, but we cannot be the victim.”
According to Jose Manuel Barroso, the European Commission President, Ukraine must ensure free gas transit to Europe if it wants to preserve good relations with the EU:

"If Ukraine wants to be closer to the EU it should not create any problems for gas to come to the EU."

Barroso said the EU was prepared to help Russia and Ukraine find common ground in their dispute. Nevertheless, if normal gas supplies were not restored, he said, the EU would be forced to view supplies of Russian gas through Ukraine as no longer “credible”.

It seems clear that while the EU is prepared to help resolve the dispute, it is not going to act as a referee in the price war between Moscow and Kiev.

Meanwhile, speaking at his residence outside Moscow, Vladimir Putin announced that Russia is ready to pay a market price for the transit of Russian gas through Ukraine - but only if Kiev pays the market price for Russian gas - $470 per thousand cubic metres.

“Gazprom made an extremely privileged offer to its Ukrainian partners. I don’t feel comfortable pronouncing the price but I will – it’s $US 250 per 1,000 cubic metres of gas. Why do I say uncomfortable? Because consumers in Russia will ask me – why would we ever do this? Nevertheless, Gazprom made the offer and guess what? It was turned down!” Putin said.