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Russia: Gas Cutoff Raises Questions About Delivery Agreements

The latest interruption of Russian gas to Ukraine comes three weeks after the two countries signed agreements to assure deliveries this year. The shutoff raises doubts about the accords and about the motives after a similar interruption in Georgia this month.

Boston, 18 January 2001 (RFE/RL) -- Russia's latest gas cutoff to Ukraine has raised questions about agreements between the two countries signed less than one month ago.

On Tuesday, the Russian gas trader Itera shut off gas supplies to Ukraine, saying that four of its electric generating firms had failed to pay bills totaling $64 million. Itera said it had warned the companies about their debts in early January. The four generators -- Donbassenergo, Zakhidenergo, Dniproenergo and Tsentrenergo -- account for about half of the power produced in the country, the Reuters news agency said.

The move came only three weeks after presidents Vladimir Putin and Leonid Kuchma hailed agreements to assure gas deliveries to Ukraine this year. On December 22, Kuchma portrayed the accord as a natural outcome of an understanding reached two months earlier.

Kuchma said that "all problems with gas supplies were fully solved by a gas memorandum signed by the two leaders at the Sochi summit meeting in October."

There was no immediate explanation as to why Kuchma's assurance has proved wrong. The two sides have yet to sign a deal on rescheduling Ukraine's past debts for gas. But they agreed in principle on December 1 that payments on at least $1.4 billion in debt would be deferred for 10 years, while Ukraine would pay for half of its current gas purchases in cash.

In the absence of a debt agreement or partial payment, Itera can justify the cutoff as a simple business matter. The more complicated question comes from the agreements that were signed last month. Under the pacts, Russia pledged it would give Ukraine 30 billion cubic meters of gas this year as a payment for transit of nearly 125 billion cubic meters to be pumped to European customers through Ukraine's pipelines.

Ukraine was to have received 12.5 billion cubic meters of gas in the first quarter of this year, an amount that could not possibly have been used in the first 15 days. Ukraine's gas consumption is estimated at 78 billion cubic meters per year.

Itera's move lends itself to several theories of what may have gone wrong. Russia and Ukraine are still trying to settle the amount owed for past supplies. While Ukraine says $1.4 billion, the Russian side has floated numbers between $2 billion and $3 billion. One way to pressure Kyiv into agreeing on a higher figure might be to cut off the gas.

The move might also signal a return to Russia's attempts to gain control of Ukraine's transit pipelines. Moscow has repeatedly pressed Kyiv to accept the country's gas bills as sovereign debts.

Russia has also sought an agreement with its European partners to build a bypass pipeline around Ukraine through Poland and Slovakia. It is unclear how the Itera stoppage will affect transit gas. But even a temporary interruption could make the case that Ukraine is an undependable route.

A further question is the delivery of Turkmen gas to Ukraine, which has also been handled by Itera. Ukraine has been paying Turkmenistan for the supplies, while its power companies have held back on their payments to Itera, a situation that may irk the Russians.

In a further complication, Turkmenistan stopped selling gas to Russia on January 1, because it refused to pay a price increase. In the meantime, Russia has been persuaded to allow Turkmen gas to keep flowing through its pipelines to Ukraine. The situation may give Kyiv less incentive to settle its debts to Moscow. The cutoff may mean that Russian patience has run out.

Some news outlets have raised suspicions of a link to charges brought Monday against Ukraine's deputy prime minister, Yulia Tymoshenko, who was appointed to reform the country's energy sector. Prosecutors allege that Tymoshenko diverted Russian gas and falsified documents.

Russian prosecutors are also said to be probing possible ties to an embezzlement case in the Russian Defense Ministry. Tymoshenko has denied the allegations, and no link to the Itera cutoff has been shown.

One reason for all the theories is a seemingly similar Russian cutoff of gas to Georgia this month. A Russian independent gas trader, Inneftegazstroi, was forced to halt deliveries when it was told by Russian authorities that it would lose its own access to gas.

Last week, the London-based Financial Times reported that the stoppage was part of an elaborate scheme by Russia's UES electricity monopoly to gain access to Georgia's power grid for electricity exports to Turkey. Part of the Georgian network is operated by an American company, AES.

The paper cited a letter from Anatolii Chubais, the chief executive of Russia's UES, who referred to "an absolute understanding" with Itera about halting its gas supplies to Georgia. That move was frustrated when AES signed a deal with Inneftegazstroi and paid for January deliveries in advance. By shutting off Inneftegazstroi, Russia reportedly forced AES to rely on gas from Itera again. A company official said that AES could now be pressured to turn over the network to UES.

Such strategies are likely to raise suspicions every time gas is blocked to a CIS country, whether it owes money or not. Paying for energy in the region has often proved to be more than a matter of debts.