Gazprom Cuts Gas Supplies to Ukraine

Russian gas giant Gazprom cut supplies of natural gas to Ukraine on Monday, despite Prime Minister Yulia Tymoshenko’s assurances that would not happen. An initial cut of 25% was followed by a second 10% reduction later in the day.

Gazprom followed through on its threat to cut off Ukrainian gas supplies after Naftogaz Ukrainy failed to pay $600 million for 1.9 billion cubic meters of gas already received this year. Naftogaz has also rejected proposals from the Russian gas giant to re-negotiate the gas trade between the two countries.

Tymoshenko wants to restructure the control of the Ukrainian gas market and remove the middlemen from the gas trade with Russia. Ukrainian President Viktor Yushchenko urged Tymoshenko to avoid a “gas war” with Russia and reach a deal with Gazprom this week.

If this situation sounds familiar, Gazprom completely cut gas supplies to Ukraine at the beginning of 2006 due to a similar dispute. An unintentional side effect of the 2006 cut off was a major reduction in gas supplies to other European countries. According to Gazprom, European supplies are not under serious threat this time.

The partial gas cutoff came hours after Gazprom chairman Dmitry Medvedev won Russia’s Presidential election.