JKX in 2005

Talks fail at the brink, tomorrow could be interesting!


Last Updated: Saturday, 31 December 2005, 22:30 GMT
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Ukraine gas cut 'will go ahead'

Ukrainian woman cooking with gas

Gas supplies from Russia will end on Sunday, Gazprom says

Russian gas supplies to Ukraine will be cut at 0700 GMT on Sunday, state-owned firm Gazprom announced after last-ditch talks failed to settle a price dispute.

The row erupted after Ukraine rejected Russian plans for a 460% price rise.

Earlier on Saturday, Russia's President Vladimir Putin offered a three-month price freeze as long as Kiev agreed to pay the higher price after that.

But after fresh talks, Gazprom said the offer had been rejected by Kiev and supplies would end as planned.

Ukraine currently pays $50 per 1,000 cubic metres of gas, which Gazprom wants to increase to what it says is the market price of $230.

Russian supplies account for about 30% of total Ukrainian gas consumption.

The loss of those supplies will be a real problem in winter, says the BBC's Economics correspondent Andrew Walker.

Ukrainian gas industry officials say heating needs can be met from other supplies, but industrial customers might face reduced supplies, he says.

The crisis has also sparked fears that European Union supplies of Russian gas, which are transported through Ukrainian pipelines, could also be hit, although Russia has insisted this will not happen.

Putin offer

Mr Putin made his offer of a stay of execution at a meeting of his powerful Security Council attended by Gazprom head Alexei Miller.

"I instruct the government and Gazprom to ensure gas deliveries in the first quarter of 2006 with the conditions and rates of 2005, on the condition that before the end of today the Ukrainian partners sign the contract with Gazprom's offer for switching to market prices in the second quarter," he said in remarks broadcast by Russian TV.

Ukrainian Prime Minister Yuri Yekhanurov's spokesman said in response that Kiev did not object to market prices but "the exact figures must be negotiated".