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Gas for Europe Is Contingent On Monitoring, Putin Says

By Philip P. Pan
Washington Post Foreign Service
Friday, January 9, 2009

MOSCOW, Jan. 8 -- Prime Minister Vladimir Putin said Thursday that Russia would resume shipments of natural gas to Europe only after international observers are in place to prevent Ukraine from stealing fuel. But talks with the European Union on a monitoring arrangement bogged down as the midwinter energy crisis on the continent worsened.

After Ukraine rejected a Russian monitoring proposal and Russia rejected one put forward by the Europeans, the European Union said in a late-night statement that Moscow had approved a plan that "should lead to Russian supplies of gas to E.U. member states being restored."

However, there was no immediate confirmation of an agreement by the Kremlin or the Ukrainian government.

The diplomacy came a day after Russian fuel deliveries to Europe through Ukraine came to a complete halt, leaving more than a dozen countries dealing with supply disruptions and several struggling to maintain heat and electricity. Russia accused Ukraine of shutting down pipelines that deliver a fifth of the continent's gas, while Ukraine said Russia had abruptly suspended shipments.

As the politically charged fuel-price standoff between Russia and neighboring Ukraine entered a second week, Putin met with European journalists and blamed the crisis on a "political collapse" inside the former Soviet republic. He also accused Ukrainian leaders of holding out on an agreement in an attempt to keep an intermediary company in place to divert funds for themselves and their political campaigns.

"The current Ukrainian political leadership is demonstrating its inability to solve economic problems, and today's situation highlights the high criminalization of its authorities," he said, according to the Interfax news agency.

"What they are fighting for today is not the gas price, but a chance to keep their middlemen, in order to use the dividends obtained for personal ends and personal enrichment, and in order to receive financial resources needed for their future political campaigns," he said.

Putin acknowledged that 50 percent of the intermediary firm, RosUkrEnergo, is owned by Gazprom, the Russian gas monopoly, but said the Ukrainian half was owned by "individuals whom we do not know."

There was no immediate response to the allegations from the Ukrainian government.

Ukraine's President Viktor Yushchenko and Prime Minister Yulia Tymoshenko have been locked in a political feud for months. Each has accused the other of mishandling the gas dispute with Russia, and Tymoshenko has sought to eliminate RosUkrEnergo's role in Ukraine's purchases of gas from Russia, calling it a vehicle for corruption on Yushchenko's part.

Using the session with European reporters to defend Russia's actions and accuse the Western media of bias, Putin also softened Russia's negotiating position, offering for the first time to pay a "market-based" fee to use Ukraine's pipelines to deliver gas to Europe if Ukraine agrees to pay a market price for the gas it buys from Russia.

Gazprom had been refusing to renegotiate the fee, saying it was fixed at a level "comparable" to the rest of Europe in a contract that remains in effect until 2010.

While continuing to defend the contract, Putin appeared to concede that Gazprom pays much less to use the Ukrainian pipelines than it does to use pipelines elsewhere in Europe. The average European fee, he said, was $3.40 per 1,000 cubic meters of gas per 100 kilometers. Gazprom pays Ukraine half that rate.

Despite the concession, no progress was reported as the two countries resumed direct talks for the first time since negotiations collapsed on New Year's Eve. Russia suspended gas deliveries to Ukraine on Jan. 1, saying that Ukraine owed more than $2 billion in overdue bills and late fees and had rejected a proposal to raise gas prices closer to what the rest of Europe pays.

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