January 08, 2009	Thursday	Muharram 10, 1430

MOSCOW / KIEV, Jan 7: Russia shut down all gas flows to Europe through Ukraine on Wednesday, sharpening a dispute that has left industries and homes in southeast Europe without power and disrupted supplies to major economies.

The row over gas prices and debts owed by Ukraine to Russia cut heating to tens of thousands of households in Bulgaria and hit supplies as far west as France and Germany as Europe faced freezing temperatures.

Kiev and Moscow blamed each other for the cut in supplies and the European Union said they should allow an EU monitoring mission to check how much gas was entering Ukraine from Russia.

“If this is agreed, nothing will stand in the way for transit supplies to be restored...That does not mean that success is 100 per cent assured,” Czech Prime Minister Mirek Topolanek said. The two sides will meet in Brussels on Thursday and the EU said they appeared willing to accept monitors.Russian gas export monopoly Gazprom said it had fully suspended supplies of transit gas towards Ukraine on Wednesday after accusing Kiev of keeping it.

Gazprom said it was increasing supplies to the European Union and Turkey via other routes. Despite those measures, the dispute cut Russia’s supplies to Europe — which depends on Moscow for a quarter of its gas supplies — by half.

The reduction in supplies started on Jan 1 when Russia reduced gas volumes to Ukraine.

The International Energy Agency said Bulgaria, Romania, Greece and Turkey would struggle to provide electricity and heating if cold weather and gas disruptions continued next week. Several countries have taken emergency measures to eke out dwindling fuel reserves by switching to other energy sources.

European warning

Topolanek, whose country holds the EU presidency, said the union was preparing an emergency meeting of EU energy ministers.

The EU has a limited ability to act and it has failed to reduce its use of Russian energy because of internal divisions and the lack of alternatives. Some member states have bilateral energy deals with Russia, undermining hopes of a united front.

European Commission President Jose Manuel Barroso said Russia and Ukraine both were ready to accept the EU monitors.

“If Ukraine wants to be closer to the EU it should not create any problems for gas to come to the EU,” Barroso said.

Ukraine’s Naftogaz chief Oleh Dubyna said Ukraine would insist on a price of $201 per 1,000 cubic metres of Russian gas for 2009, less than half of Russia’s proposal. It also wants to increase transit fees and scrap a controversial gas intermediary.

Ukraine’s pro-western President Viktor Yushchenko appealed to the European Union to use all efforts to help end the crisis, which has further dented investor confidence in his country.

Moscow bitterly opposes Yushchenko’s efforts to join Nato.

The cost of protecting Ukrainian debt against restructuring or default rose to 54.75 per cent on an upfront basis, meaning an investor buying protection for $10 million of Ukrainian debt must pay $5.475 million plus $500,000 a year for five years.

Slovak Prime Minister Robert Fico said Slovakia might reopen a power generating unit at Jaslovske Bohunice nuclear plant if a freeze of gas supplies from Russia continued.

“Should Slovakia continue to be a hostage of this bilateral conflict between Russia and Ukraine, I can imagine reopening of the shut-down unit at Jaslovske Bohunice nuclear plant,” Fico told a press conference.—Agencies