Ukraine moves to solve gas row with Russia

RUSSIA:Ukraine is rushing to resolve a dispute over alleged gas debts to Russia, after Kremlin-controlled energy giant Gazprom threatened to cut fuel supplies to the country when its president Viktor Yushchenko visits Moscow tomorrow.

The timing of the gas cut-off would embarrass Mr Yushchenko, who blames new prime minister Yulia Tymoshenko for souring relations with Gazprom with demands for a new energy deal.

The row has rekindled European Union memories of a similar 2006 spat, during which member states suffered a reduction in Russian gas pumped via Ukraine. That fuelled doubts about the Kremlin's reliability as an energy provider and about its apparent willingness to use its huge gas and oil reserves to put political pressure on other states.

Russian first deputy prime minister Sergei Ivanov insisted yesterday, however, that the latest row was financial and would not affect gas supply to the EU.

"We will not engage in billions of dollars in charity anymore," he said. "At the same time it will have no consequences for other consumers of Russian gas or Asian gas." Mr Ivanov said central Asian gas-producing countries were using more fuel than usual during a very cold winter, causing a shortfall in their supply to Ukraine. Gazprom was pumping more to Ukraine to fulfil the needs of a "brotherly" country, but had not been paid, he complained.

After initially denying that Ukraine owed Russia $1.5 billion (€1.03 billion) in unpaid fuel bills, a deputy of Ms Tymoshenko has now offered to pay the sum if Gazprom agrees to sell gas direct to Ukraine without involving intermediary firms.

Ms Tymoshenko wants a new deal that does not involve RosUkrEnergo, a mysterious company that makes huge profits as a middleman delivering Gazprom gas to Ukraine.

She blames the firm for a 2006 rise in the price Ukraine pays for Russian gas, and claims that one of its major beneficiaries is Semyon Mogilevich, an alleged mafia boss arrested in Moscow last month. He and the company deny having any relationship.

Analysts detect a power struggle behind the scenes at the Kremlin and Gazprom. The capture of Mr Mogilevich was seen as a victory for one faction, but the current gas row is construed as a warning to Ukraine from a rival clan not to squeeze out Ros- UkrEnergo. Gazprom's chairman is Dmitry Medvedev, the man expected to become Russia's president in next month's election.