Amid 'gas war' talk, Russia reassures Europe

NATALIA ZINETS AND ALEXEI ANISHCHUK
Last updated 06:52 12/04/2014

Russia to honour Europe gas deals

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Russian President Vladimir Putin tried to ease European fears of gas supply cuts on Friday after Brussels said it would stand with the new authorities in Kiev if the Kremlin carries out a threat to turn off the tap to Ukraine.

Russia, which last month angered Western powers by annexing Ukraine's Crimea peninsula, has raised the price it charges Kiev for gas and said it owes Moscow US$2.2 billion in unpaid bills.

That has raised the spectre of previous "gas wars", when rows between the two former Soviet states led to problems with onward supplies to western Europe. A repeat of that scenario could hurt Russia as well as EU customers for its gas because Moscow depends for its public revenues on selling gas in Europe.

"I want to say again: We do not intend and do not plan to shut off the gas for Ukraine," Putin said in televised comments at a meeting of his advisory Security Council. "We guarantee fulfilment of all our obligations to our European consumers."

The stand-off, precipitated by the overthrow of the Moscow-backed Ukrainian president after he rejected closer ties to the European Union, has brought Russia's relations with the West to their most fraught since the end of the Cold War in 1991.

After Russian troops took over Crimea last month, officials with the NATO military alliance said Moscow was massing forces on the border with mainly Russian-speaking eastern Ukraine, possibly as a prelude to seizing more parts of the country.

Russian Foreign Minister Sergei Lavrov denied on Friday that this was the Kremlin's intention.

"We cannot have such a desire. It contradicts the core interests of the Russian Federation. We want Ukraine to be whole within its current borders, but whole with full respect for the regions," state-run RIA news agency quoted Lavrov as saying.

The Kremlin intervened in Crimea after President Viktor Yanukovich was pushed out following weeks of protests in the capital that turned bloody in mid-February. He was replaced by a government that wants close ties with the West, but which Moscow says is illegitimate and discriminates against Russian-speakers.

Russia's chief prosecutor said on Friday Moscow would not extradite Yanukovich, whom he called Ukraine's "legitimate president", to face murder charges over protesters' deaths.

REVERSE FLOWS

Though tension was still high around eastern Ukraine, where pro-Russian activists this week seized public buildings in two cities, the focus of the stand-off between Moscow and the West appeared to be moving towards the vexed issue of gas.

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Saying the EU would stand together, German Chancellor Angela Merkel said member states would make a common response to a letter Putin has sent to European gas importers raising the prospect of cutting off supplies to Ukraine.

"There is good reason to take this letter as an opportunity to deliver a joint European response," she said in Greece, which relies heavily on Moscow for gas. "We want to be good customers and we want to be able to rely on Russian gas supplies."

A large proportion of Europe's gas is pumped from Russia via Ukraine's territory.

Moscow has said it will cut off supplies to Ukraine if it fails to pay what it owes. But Ukrainian Energy Minister Yuri Prodan told parliament the EU would stand in solidarity with Kiev to blunt the impact of any cut-off or reduction in supplies to Ukraine.

"Ukraine cannot pay such a political, uneconomic price," Prodan said.

If Moscow were to scale back deliveries of natural gas to Ukraine, the effects would be unpredictable.

EU states have said they will reverse the flow of pipelines that deliver Russian gas to them, pumping fuel back towards Ukraine. The volumes involved are small, but they would mitigate a Russian cut-off.

"We are negotiating with the European Union about reverse deliveries into Ukraine," Prodan said. "We will make gas purchases from reverse flows urgently, on the conditions offered by European gas companies."

Officials in Kiev said these would be Germany's RWE and France's GDF Suez. A European Commission spokeswoman said there would be a meeting on Tuesday between pipeline operators from Ukraine and its western neighbour Slovakia to resolve technical issues.

Brussels has also said it would prevent Russia from shipping extra gas to EU customers via pipelines that go around Ukraine to make up for deliveries disrupted by any cut-off to Ukraine.

In effect, this raises the stakes for Russia; if it wants to reduce supplies to Ukraine, it will also end up disrupting deliveries to its EU customers as well. That would serve to speed up European steps to diversify away from Russian gas.

European Energy Commissioner Guenther Oettinger told Austria's ORF radio he was working on a plan to help Ukraine pay its gas bills to ensure its debts do not rise.

BESIEGED PROTESTERS

In eastern Ukraine, government buildings in the cities of Donetsk and Luhansk were still being occupied by pro-Russian protesters who want their regions to split from Kiev.

On Friday, a deadline set by the Kiev authorities for the protesters to end their occupation expired, but there was no sign of action from the Ukrainian police to force them out.

Ukrainian officials, calling it a repeat of the "Crimean scenario" say Russia may send in troops to the eastern regions on the pretext of protecting those protesters from persecution by Kiev, an allegation Moscow denies.

Arseny Yatseniuk, prime minister of an interim government that is holding a presidential election on May 25, visited Donetsk and renewed promises of constitutional change to give regions devolved finance and other powers.

Kiev is resisting calls, backed by Moscow, for full-blown "federalism" that it fears would break up the state altogether.

Yatseniuk also warned those occupying the buildings that the authorities could force them out if they refused to surrender.

In their latest telephone contact, Russian Foreign Minister Sergei Lavrov asked US Secretary of State John Kerry to urge Yatseniuk not to use force and to negotiate with the activists.

On a visit to Bulgaria, a NATO and EU member that retains close cultural ties to Moscow, NATO Secretary General Anders Fogh Rasmussen said Russia must withdraw its troops from the Ukrainian border and enter into sincere dialogue with the West.

The Western defence alliance presented satellite photographs on Thursday that it said showed Russian deployments of 40,000 troops near the Ukrainian frontier along with tanks, other armoured vehicles, artillery and aircraft ready for action.

Russia said it was normal military activity, not preparation for any attack. But in a mark of concern, Ukraine said it was not demobilising army conscripts who had finished their service.

In response to Russia's annexation of Crimea, the EU and the United States adopted what they have called targeted measures, including visa bans and asset freezes on Russian officials.

Moscow, though, has scoffed at these sanctions as ineffective, and officials have called on Russian firms to retaliate by bringing assets based abroad back home.

Polyus Gold, Russia's biggest gold miner, became the first big company to respond, saying it was considering its options. Its shares are listed in London and it is registered in Jersey. "As a company with operating assets wholly located in Russia," Polyus said in a statement, "The board recognises that these developments may have particular implications for the company's business and development plans."

- Reuters

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