Moscow, Russia, January 2: Russia stopped the gas supply to Ukraine yesterday, after Ukraine failed to abide by the contract’s conditions. The European Union, on the other hand was benefited, as Russia announced increased supplies for them.
Reportedly, Ukraine's state gas company Naftogaz had failed to pay its debts of more than $2 billion owed to Russian gas supply giant Gazprom. The Russian company will not renew the contract with Ukraine until it settles all the payments.
However, the European Union (EU) is assured of increased gas supplies even though it does not trust Russia’s commitments. Already, Russian war against Georgia has raised uncertainties of fuel supply in the West. EU also fears that supply cut off to Ukraine may also disrupt their supplies, as the gas pipelines towards west pass across Ukraine. In 2006, EU had to face a short disruption in its gas supply, when Russia had cut off supply to Ukraine.
The European Union and United States have urged the two countries to resolve the dispute, saying that supply commitments should not be forgone.
The Ukrainian government and Naftogaz are still expecting a compromise by Jan.7. Naftogaz said it was prepared to pay an increased amount up to $235 per 1,000 cubic as against $179.5 paid previously by the Ukrainian gas company for the gas supply.
The deal does not look that easy, as Russia is now demanding $418 per 1,000 cubic, almost double of what it received earlier and close to what is paid by the western countries. Ukraine, on the other hand, will try to lower the debt figures by increasing transition fee that Russia pays to it for sending gas across its territory.
Analysts fear that Ukraine might go into recession soon if compromise is not made, and persisting political turmoil may further worsen the situation. Ukrainian President Viktor Yushchenko has been feuding with Prime Minister Yulia Tymoshenko over several issues; restoration payments to people during the currency crash and majorly for the president’s drive to take Ukraine into NATO.
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