1. COUNTDOWN TO RUSSIA’S CUTTING UKRAINE GAS HAS BEGUN

Agence France Presse, Moscow, Russia, Saturday, Dec 31, 2005

MOSCOW (AFP) – The final countdown has begun for Russia’s politically charged threat to end gas supplies to neighbouring Ukraine on New Year’s Day unless the ex-Soviet republic agrees to a more than fourfold increase in prices.

Russia’s giant state-owned company Gazprom, which controls a third of the world’s gas reserves, says supplies to the country of 48 million people will be switched off Sunday at 10:00 a.m. in Moscow (0700 GMT) if Kiev still refuses the new price.

“The actions will be precise and resolute,” Gazprom chief Alexei Miller warned.

Gazprom wants Ukraine to pay 230 dollars (185-194 euros) per 1,000 cubic metres (35,316 cubic feet) of gas, up from the current price of 50 dollars from the start of 2006. The company says that this price merely reflects standard world rates.

Ukraine says it is ready to pay more but not so quickly and is offering up to 80 dollars in a preliminary transition period. Moscow has flatly dismissed the offer.

Officials in Kiev say that industrial centres will see a drop in supplies, but that ordinary people should notice no difference, as the country has enough reserves to last the bitterly cold winter. “The people will feel nothing,” Prime Minister Yury Yekhanurov promised. Ukraine is “ready for any cataclysm.”

President Viktor Yushchenko on Friday appointed a new deputy prime minister with a brief to manage the energy sector and achieve self-sufficiency for Ukraine “in four years.”

There was mounting concern about the possible knock-on effect of the row for western Europe, which is heavily dependent on Russian energy supplies, most of which transit through Ukraine.

Miller said Gazprom had a “detailed plan of measures” to guarantee EU supplies. However the European Commission called a special meeting of its gas coordination group for Wednesday to discuss how to “deal with all eventualities.”

Polish Economy Minister Piotr Wozniak said that supplies to his country, which receives 90 percent of its imported gas from the east, were under threat.

“The harmful potential effects of a fall in deliveries risks being felt in Poland from the first days of January,” he said. Wozniak added that in the event of supply disruptions, “commercial and
technical conditions” meant Poland would be able to satisfy domestic gas demand for at least a week.

The European Commission said it was “confident” that the dispute would not lead to a shortage just as demand spikes in Europe on account of cold winter weather.

“Even if a limited part of European supplies were to be interrupted, given the level of gas stocks and supplies from other areas, the (European) Commission is confident that this would not cause a gas shortage in Europe in the short term,” it said.

There are strong political overtones to what Gazprom says is purely commercial dispute. Yushchenko came to power almost exactly a year ago in the pro-Western “orange revolution” that saw him defeat a Russian-backed candidate in elections and vow to bring Ukraine into the European Union and NATO.

In March his supporters face a strong challenge in parliamentary elections that analysts say could signal the comeback of his pro-Kremlin rival Viktor Yanukovich. -30-

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