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January 12, 2009

Barring 'Obstacles,' Russia Ready To Resume Gas Shipments

by Chloe Arnold

MOSCOW -- Russia's Gazprom monopoly says it is tentatively prepared to resume natural-gas shipments to Europe on January 13, barring any "obstacles" in its agreement with transit country Ukraine.

Continued disagreements between the two sides appeared to scupper an agreement on January 11 on restoring shipments.

Gazprom deputy chief Aleksandr Medvedev told a news conference in Brussels that supplies should be restarted at 0700 GMT on January 13.

It is expected that it will take at least 36 hours before gas flows reach the borders of the European Union, meaning the Balkans and parts of the European Union will continue to suffer without heating for several more days.

"I think we have resolved all the outstanding issues with the Russian side," EU Energy Commissioner Andris Piebalgs told journalists in Brussels after the signing of an accord on a gas-transit monitoring mission.

"It's definitely important that the Ukrainian side fully supports this, because it is the key to success if all the three sides work in the same spirit, with the same ambition to deliver gas to the consumers," Piebalgs said.

EU's Patience Exhausted

Observers could be forgiven for skepticism.

On January 11, a deal between Russia and Ukraine brokered by the EU fell through after Russian President Dmitry Medvedev declared the agreement null and void because of handwritten provisions added to the text by Ukrainian Prime Minister Yulia Tymoshenko.

The additions reportedly were an attempt, in part, to clear Ukraine of allegations it had siphoned off EU-bound gas shipments. Disagreements also appeared to remain regarding the stationing of international monitors along the pipeline routes once shipments are restored.

The continued back-and-forth -- which has taken place as Central and Southeastern Europe has endured a weeklong cold snap with dwindling fuel supplies -- has exhausted the patience of the European Union.

European Commission President Jose Manuel Barroso said on January 12 that the EU could not accept any further delay in resuming Russian gas supplies through Ukraine.

"The monitors are in place today, and we cannot expect further delays or further excuses that keep European citizens in the cold and that keep European citizens without the gas they are paying for," he said.

Barroso also said he had received personal assurances from Ukrainian President Viktor Yushchenko that there would be no obstruction of the flow of gas from Russia to the European Union via Ukraine.

A delegation of senior Russian government officials flew to Brussels on January 12 to try to hammer out a new deal.

Hours later, television cameras caught Gazprom CEO Aleksei Miller instructing staff members via mobile phone to prepare for the arrival of EU gas monitors at gas-measuring stations on the Russian-Ukrainian border.

"The last signature has just been put under the protocol on monitoring the transit of Russian gas via Ukrainian territory; it has been signed by the European Commission," Miller said.

"Please ensure the arrival of foreign observers at Gazprom's gas-measuring stations on the border," he continued. "Please ensure the arrival of Russian observers at gas-measuring stations in countries bordering Ukraine and ensure the arrival of Russian observers at gas-measuring stations, gas-transit facilities, and underground [gas] reservoirs in Ukraine."

Impact On Reputations

The deal may have a lasting impact on the reputations of both Russia and Ukraine as reliable EU energy partners.

EU energy ministers are meeting in Brussels on January 12 to discuss the crisis and to try to find ways to help the countries worst-affected by the gas shortages. They are also expected to address the issue of energy diversification to prevent such heating crises in the future.

Slovakia has considered reopening a nuclear reactor it shut down last year to make up for its dwindling energy supplies, while Bulgaria has been forced to close schools because it can no longer heat them.

The EU may also consider alternative fuel-supply routes, including the proposed Nabucco pipeline, which would pipe Central Asian gas to Europe while bypassing Russian control.

Russia has expressed its regret at the disruption to gas supplies to the EU.

"We express solidarity with our customers in Europe," Prime Minister Vladimir Putin said at a cabinet meeting on January 12. "Delays, which have caused a disruption of supplies and essentially a gas blockade of Europe by a transit country, Ukraine, are unacceptable and we hope this will never happen again in the future.”

Clear Political Dimension

Analysts say there is clearly a political dimension to this commercial gas dispute.

"It seems to me that the problems that Russia experiences with gas transit across Ukraine in particular are caused by the political nature of the gas-sales agreements and the gas-pricing structure between those two countries," says Julian Lee, senior energy analyst at the Center for Global Energy Studies in London.

"If this were taken out of the political arena -- through a clear and transparent pricing mechanism and a long-term contract -- there would be no need for any of this posturing and any of the disruption that seems to be caused every winter," Lee says.

For Yevgeny Volk, director of the Moscow office of the Washington-based Heritage Foundation, the current row stems from Ukraine's Western-leaning government, the legacy of the country's Orange Revolution in 2004.

"The reason is that the historical paths of Russia and Ukraine are getting further and further apart," Volk says. "Ukraine is striving to become a part of Europe, the EU, and NATO, while Russia is trying to hold onto its former Soviet protectorates and doesn't want to let them leave its sphere of influence. I think the current dispute demonstrates not just this, but also that Russia wants to discredit Ukraine in the eyes of the European community."
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