Ukraine reassures Europe over gas supplies

Ukraine’s natural gas company Naftogaz said on Monday that it will meet all of its contractual commitments to ship natural gas to European countries, following Russia’s cut-off of gas supplies on Sunday.

However, Gazprom announced on Monday that it would increased supply to Europe via Ukraine by 95 mln cu metres per day.

The stop in supply came after Russia’s natural has monopoly Gazprom announced last week that it wanted to charge Ukraine the full market rate for gas (around four times the rate paid now), instead of the subsidised rate, currently of USD 50 per 1,000 cubic metres, which Ukraine has enjoyed for many years.

However, under a 2002 deal between the two companies, Gazprom and Naftogaz can adjust contracts annually. Failure to reach agreement led to Gazprom cutting off supplies. Ukraine has also been accused of illegally siphoning off gas, a charge which it denies.

Ukraine is a major transit country for Russia’s gas to European markets, some of which reported supplies down by as much as one-third on Monday.

Although a settlement over the gas issue, probably involving a staged increase in the price, is expected before the end of the week, some experts have commented that the incident has hurt Russia in the long run, since it has brought home to EU leaders the need to reduce energy dependence on Russia.

Russia is chairing the G8 summit this year, in which energy security will be on the top of the agenda.