4. RUSSIA REFUSES TO BACK DOWN IN UKRAINE GAS FIGHT

A Wall Street Journal Online News Roundup
New York, New York, December 31, 2005; Page A10

NEW YORK – Russian authorities refused to ease their tough stance in a
politically charged dispute with Ukraine over gas prices Friday, issuing a
stern new threat to halt supplies to its neighbor on New Year’s Day and
criticizing Kiev’s call for more time reach a deal.

Ukrainian leaders, meanwhile, tried to reassure the ex-Soviet republic’s 48
million people they will not be left in the cold by the conflict that has
underlined the political tension caused by the election of a
Westward-leaning president in Ukraine last year.

The chief of Russia’s natural gas monopoly, OAO Gazprom, reiterated that it
will halt supplies to Ukraine on Sunday morning unless a new contract is
signed with its Ukrainian counterpart. “The actions will be precise and
resolute,” Alexei Miller said on Gazprom-owned NTV television. The station
cut into a news broadcast to show Mr. Miller live.

Russian authorities are demanding that Ukraine pay $230 — more than four
times the current price of $50 — per 1,000 cubic meters of gas. Ukraine
wants a more gradual increase that would bring what it pays closer to world
prices and says $75 to $80 is a fair price for now. The price Russia wants
Ukraine to pay is far higher than it is charging other former Soviet
republics, even those that are seeking, like Ukraine, to shake off Russian
influence and integrate with the West.

Nadia Kazakova, an oil and gas analyst at Alfa Bank in London, said West
European countries would pay an average of $240 per 1,000 cubic meters next
year. Hungary is paying $240 for Russian gas, and Romania will pay about
$280 starting next year, officials said. “There is room for negotiation
between $230 and [a price] which Ukraine might be willing to pay,” Ms.
Kazakova said. “Ultimately I think there will be some resolution.”

But with no sign of progress toward a deal, Ukrainian President Viktor
Yushchenko proposed Friday that Russian President Vladimir Putin order

both countries’ companies to sign a contract in the first 10 days of January,
freezing prices until then, Mr. Yushchenko’s office said.

Mr. Putin’s press service said the Kremlin hadn’t received the telegram in
which Mr. Yushchenko made the proposal, and there was no immediate reaction
from the Russian leader. But Gazprom said it feared the proposal would lead
to indefinite delays.

Meanwhile, Gazprom has warned European importers that natural-gas supplies
may be restricted if Russia makes good on its threat to cut off gas exports
to Ukraine on Jan. 1.

“Gazprom has written letter to all the companies that they supply to tell
them that there is a possibility that they should be forced to cut supplies
to European companies concerned from January 1,” a European Union

official told Dow Jones Newswires Friday.

Gazprom later confirmed the letter had been sent and released part of the
text. The letter, which guaranteed delivery of all contracted gas as far as
the Russian-Ukrainian border — but not farther — was sent Dec. 28, the
company said. “We cannot completely exclude the risk of unsanctioned

removal of gas from the transit system by the Ukrainian side,” the letter said.
The company didn’t say which companies received the letter.

In response to the spiraling energy crisis, European government
representatives will meet in Brussels Jan. 4 to coordinate their response to
the impact of a squeeze on Europe’s gas supply due to the dispute between
Russia and Ukraine over the price of Russian gas, an EU spokesman told

Dow Jones Newswires. “We want to have a coordinated approach and to
be ready to face all eventualities, meaning of course a shortage of gas
supply for different amounts of time,” Amadeu Atafaj Tardio said.

The EU gets about half its gas from Russia, and Eastern European countries
are especially dependent on Russian gas. According to European Commission
figures, Bulgaria, the Czech Republic and Poland bought 97%, 79% and 62% of
their gas, respectively, from Russia in 2003. Among Western European
countries, Germany sourced 39% of its gas from Russia, while Italy drew 28%
of its needs. -30-

NOTE: Juliane von Reppert-Bismarck of Dow Jones Newswires contributed to
this article. Write to the Online Journal’s editors at
newseditors@wsj.com

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