RUSSIA: European Union energy officials will meet in emergency session next week amid fears that Russia's threat to cut Ukraine's gas deliveries will disrupt supplies.
Russia's state gas company Gazprom says it will turn off the tap to Ukraine on January 1st unless Kiev agrees to a more than fourfold increase in prices.
With Ukraine refusing the payment, there are fears that Kiev, desperate for energy as temperatures plummet, will siphon off supplies from the pipeline that passes to the EU, or even cut it altogether.
Russia insists supplies to western Europe will be protected, with Gazprom chief executive Alexie Miller announcing a "detailed plan" for supplies to be safeguarded.
Yet the gas must pass over Ukrainian territory and there is no practical way of preventing Kiev from cutting or diverting the supplies.
EU diplomats have been pushing both sides to agree a compromise deal all week, and energy chiefs will meet in Brussels on January 4th to review the situation. "The idea is to be ready for all eventualities," said European Commission spokesman Amadeu Altafaj Tardio.
Germany, which gets 30 per cent of its gas supplies from Russia through the pipeline, took the lead yesterday in urging both sides to agree a cooling-off period for fresh talks.
Gas prices are already at record levels, and with the EU taking 25 per cent of supplies from the Russian pipeline passing through Ukraine, there are fears costs could further rocket.
For Ukraine, already mired in debt and with an economy that has failed to grow despite privatisations in the wake of last year's "Orange Revolution", the cut to supplies would be disastrous. Heating and light would suffer, as would the country's steel industry, one of its few export earners.
This crisis follows a month of brinkmanship between Ukraine and Russia, which began when Russian president Vladimir Putin confirmed that Gazprom had the right to demand the price increase from the present $50 (€42) per thousand cubic metres to $230 (€195).
Gazprom says it is entitled to demand market prices for its gas, and wants to overturn a deal signed five years ago agreeing to the present subsidised prices. It has suggested sending the dispute to international arbitration.
Kiev acknowledges that it must pay this price, but has insisted on a transition period lasting several years to allow it to adjust.
Gazprom is controlled by the Kremlin, and its insistence on a price hike is being seen in Kiev as revenge for last year's "Orange Revolution", when voters spurned a Moscow-backed candidate in favour of president Victor Yushchenko, who wants his country to ally with the West.
"Gazprom has received an order to pressurise until the maximum is reached," said Lidiya Skurativska in Kiev's online news site Ukranska Pravda.