updated 1/2/2006 11:41:42 AM ET 2006-01-02T16:41:42

Russia’s state-controlled natural gas monopoly on Monday accused Ukraine of diverting about $25 million worth of Russian gas intended for other customers, a day after Moscow halted deliveries to Kiev in a price dispute whose effects were spreading across Europe.

Ukraine in turn accused Russia of trying to undermine its economy, calling for a resumption of gas price negotiations, this time including international experts.

Russia’s OAO Gazprom halted gas deliveries to Ukraine on Sunday after Kiev balked at paying quadruple the amount it previously paid for Russian gas, which accounts for about a third of the consumption in the country of 48 million people.

Gas supplies to much of Europe fell sharply Monday in the fallout of the pricing dispute, and several nations urged energy-hungry industries to switch to oil. Gazprom said Monday in a telegram to the Ukrainian gas distributor Naftogaz that it would increase the amount of gas being shipped to European customers.

The telegram, a copy of which was made available to The Associated Press, said the increase of 95 million cubic meters a day was necessary to compensate for gas it accused Ukraine of diverting.

Significant cuts
Ukraine acts as a transit country for most of Russia’s gas consignment to Europe. Hardest-hit Serbia saw gas deliveries cut in half, and planned to start reducing supplies Wednesday to water heating plants supplying nonessential users such as factories.

Hungary, Poland and Austria reported that gas piped to them from Russia through Ukraine had slowed down by between 14 and 40 percent. French utility Gaz de France SA said there has been a “significant deterioration” of about 25 percent to 30 percent in natural gas from Russia.

German gas companies said they were seeing a noticeable reduction in supplies arriving via Ukraine, and deliveries to big businesses could be affected by the dispute. Romania’s deliveries from Russia were down by 25 percent, said officials, but unseasonably warm weather eased immediate concerns.

Apart from Serbia, gas was flowing normally to homes and businesses thanks to stored supplies, and Italy and other nations with diversified gas sources saw even fewer effects.

The former Soviet republic of Moldova, which neighbors Ukraine, has not received Russian gas supplies for two days, Russia’s RIA-Novosti news agency reported. It said Moldova had not signed a 2006 contract with Gazprom, and that Moldovan President Vladimir Voronin had complained that the Russian price was too high.

Like Ukraine, Moldova has sought to orient itself away from Russia and toward the West.

Gazprom supplies about one-quarter of the gas consumed in Europe. Most of that goes through pipes that cross Ukraine.

The only gas now being put into pipelines headed for Ukraine is intended for European customers, the company said.

Gas prices rose marginally on Monday, although there was little to indicate the dispute between Russia and Ukraine was affecting prices.

Gazprom deputy chairman Alexander Medvedev said Ukraine had siphoned off about 100 million cubic meters of gas on Sunday alone, worth about $25 million.

“If the theft will continue at such a tempo, then the value of the stolen goods will be extremely significant,” he told reporters.

Gazprom has invited the Switzerland-based goods inspection and testing company SGS to record how much gas is entering Ukraine’s pipeline network.

Ukrainian Prime Minister Yuriy Yekhanurov on Sunday denied Ukraine was siphoning off gas, saying “we are not using a single cubic meter of Russian gas.” Ukraine’s Fuel and Energy Minister Ivan Plachkov repeated the denial Monday, Interfax reported.

“There has been no unauthorized diversion of gas. Ukraine is using its own gas; gas from underground stores and gas from Turkmenistan in strict compliance with the signed contract,” Interfax quoted Plachkov as saying.

Turkmenistan is Ukraine’s single-largest supplier of gas.

Ukrainian President Viktor Yushchenko spoke with Turkmen leader Saparmurat Niyazov on Monday and his office reported that Niyazov had “once again” confirmed the two countries’ gas supply contract. The head of Ukraine’s Naftogaz state gas company, Alexei Ivchenko, flew to Turkmenistan on Monday for talks, Yushchenko’s office said.

Naftogaz spokesman Eduard Zaniuk declined to comment Monday on the drop in supplies to Gazprom’s customers to the West.

Economic pressure
Ukraine accusing Moscow Sunday of following “a scenario aimed at economic pressure and blackmail and ultimately at undermining the stability of the Ukrainian economy and foiling Russian gas deliveries to consumers in EU countries,” the Foreign Ministry said.

Yushchenko on Sunday also denounced Russia for imposing “obvious economic pressure on Ukraine.” Relations between the two have been chilly since Yushchenko came to power a year ago and vowed to move Ukraine out of Russia’s sphere of influence.

In Washington, State Department spokesman Sean McCormack said such an abrupt gas stoppage “creates insecurity in the energy sector in the region and raises serious questions about the use of energy to exert political pressure.”

Gazprom has demanded that Ukraine start paying $230 per 1,000 cubic meters of gas, which the company says is in line with world market rates. Ukraine paid $50 per 1,000 cubic meters last year.

Ukraine says such a huge leap would cripple the country’s economy, which relies strongly on energy-intensive heavy industries. It has not objected to paying more but wants to phase the increase in gradually.

Supply problems to Europe could undermine Western trust in Russia’s natural gas industry, one of the keystones of the country’s economy, and tarnish Russia’s stint as chairman of the Group of Eight, which formally started Sunday.

EU Energy Commissioner Andris Piebalgs said last week that Europe could cope with a temporary interruption to its gas supply. EU energy experts will meet Wednesday to examine the situation.

© 2012 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.

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