Europe feels effect of Russia-Ukraine gas fight

Economic pressure
Ukraine accusing Moscow Sunday of following “a scenario aimed at economic pressure and blackmail and ultimately at undermining the stability of the Ukrainian economy and foiling Russian gas deliveries to consumers in EU countries,” the Foreign Ministry said.

Yushchenko on Sunday also denounced Russia for imposing “obvious economic pressure on Ukraine.” Relations between the two have been chilly since Yushchenko came to power a year ago and vowed to move Ukraine out of Russia’s sphere of influence.

In Washington, State Department spokesman Sean McCormack said such an abrupt gas stoppage “creates insecurity in the energy sector in the region and raises serious questions about the use of energy to exert political pressure.”

Gazprom has demanded that Ukraine start paying $230 per 1,000 cubic meters of gas, which the company says is in line with world market rates. Ukraine paid $50 per 1,000 cubic meters last year.

Ukraine says such a huge leap would cripple the country’s economy, which relies strongly on energy-intensive heavy industries. It has not objected to paying more but wants to phase the increase in gradually.

Supply problems to Europe could undermine Western trust in Russia’s natural gas industry, one of the keystones of the country’s economy, and tarnish Russia’s stint as chairman of the Group of Eight, which formally started Sunday.

EU Energy Commissioner Andris Piebalgs said last week that Europe could cope with a temporary interruption to its gas supply. EU energy experts will meet Wednesday to examine the situation.

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