Russia blasted over gas war with Ukraine

MOSCOW - The United States has slammed Russia for halting gas supplies to Ukraine, saying the policy raised questions about use of energy as a political weapon.

Russia, taking over the G8 chairmanship for the first time this month and aiming to promote itself as a reliable energy source, cut its neighbour's gas supplies on Sunday.

Moscow said it had no choice but to act after Kiev refused to sign a new contract that would have increased prices fourfold, ending the preferential subsidy treatment of Soviet days.

Kiev said Moscow's decision was an attempt to undermine its pro-Western Government, adding that cutting supplies would undermine deliveries passing through the same pipeline complex to Europe.

Other European countries voiced concern that the crisis would hit their supplies at the height of winter.

The move appeared to be affecting deliveries to central Europe by early evening, with both Hungary and Poland reporting reduced deliveries.

Washington stepped into the row, with the State Department saying it regretted Russia's move.

"Such an abrupt step creates insecurity in the energy sector in the region and raises serious questions about the use of energy to exert political pressure," department spokesman Sean McCormack said.

"The US has encouraged a compromise solution, and we remain hopeful that a resolution will be reached between the two sides that provides energy security and predictability."

Western Europe, where demand is peaking because of freezing weather, imports a quarter of its gas from Russia, with most delivered through pipelines running across Ukraine.

The Russian state monopoly, Gazprom, said enough gas was still being piped via Ukraine to meet commitments to other countries. It added the only reason for shortages would be Ukraine tapping into supplies.

Hungary's gas wholesaler MOL said its Russian deliveries via Ukraine had fallen by more than a quarter, forcing it to order big customers to switch to oil where possible. Poland said supplies were down by 14 per cent.

Germany's largest gas supplier, EON-Ruhrgas, warned there could be problems for big wholesale customers if the dispute dragged on.

"If the reduction in supplies should prove to be especially large or last for a long time, or the winter turns out to be especially cold, then we will hit the limits of our capacities," chief executive Burckhard Bergmann said.

German, Italian, French and Austrian energy ministers have appealed to Moscow and Kiev to keep gas flows steady and an emergency European Union meeting is due on Wednesday.

Western-leaning Ukrainian President Viktor Yushchenko's plan to take his state into the EU and Nato has angered Moscow, which does not like the idea that its influence over the former Soviet Union might be waning.

Ukrainian officials say that is why the Kremlin is punishing Ukraine with a huge price increase while giving Moscow-friendly ex-Soviet states such as Belarus a much easier ride.

Yushchenko, struggling to live up to his people's high hopes after the "Orange Revolution" a year ago, said Ukraine was prepared to pay more for its gas - but will not agree to a big jump all at once.

Moscow wants to raise the price to US$230 ($341) per 1000 cubic metres from the present US$50.

Ukraine had threatened to retaliate by raising the rent that Russia's Navy pays to use the port of Sevastopol as headquarters for its Black Sea fleet.

It also says it is entitled to skim off 15 per cent of gas to cover transit fees on pipelines in its territory, but Gazprom has accused Ukraine of siphoning off gas illegally.

Ukraine still has gas, thanks to reserves and the country's own modest output, and officials say there is enough in store to see households through the winter.

THE BURNING ISSUE

* GERMANY: Gets more than a third of its natural gas from Russia. The nation's storage facilities are almost completely full, with enough gas to last for up to 75 days. The Government could also import more supplies from Norway.

* POLAND: The nation's supplies have been cut by 14 per cent. The Government is considering getting more gas from Belarus.

* ITALY: The country gets about 30 per cent of its gas from Russia. State company Eni says Gazprom has told it supplies could be at risk. Italy has enough stocks for 15 days. It exports gas-generated electricity to neighbours and might run down gas stocks faster than forecast.

* ROMANIA: Has enough stocks to cover until the end of February.

* FRANCE: Gaz de France says it is following the situation very closely and looking at "precautionary measures" to secure supplies.

* CZECH REPUBLIC: RWE Transgas says it will guarantee domestic supplies for several weeks if imports are interrupted.

* BULGARIA: State monopoly Bulgargaz said it did not expect supply to be threatened.

* HUNGARY: Supplies have fallen by more than 25 per cent since the crisis in Ukraine. Big gas consumers have been ordered to switch to oil where possible.

* AUSTRIA: Oil and gas group OMV said its Russian supplies were down by a third and would have to use reserves. 

- REUTERS