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Russia Pledges to Increase Gas Supply to Europe Amid Dispute with Ukraine

  • Bill Gasperini

Russia's energy company Gazprom says it will increase the amount of natural gas it sends to its European customers through Ukraine. The move comes as Russia accuses Ukraine of stealing gas meant to go to Europe.

Gazprom officials say they will increase the amount of gas it sends to Europe through Ukraine after various countries complained the amount reaching them was dropping.

Russian officials say this is because Ukraine is siphoning off gas from the pipeline that passes through its territory en route to western Europe. Ukrainian officials deny this, but say they could take such a measure if the gas crisis continues.

The flow of gas has decreased since Sunday when Russia cut off supplies to its neighbor in a dispute over prices. But on Monday many countries including Poland and Austria say supply levels have declined.

Russia wants to quadruple the price of gas it sells to Ukraine, from the current $50 to $230 per 1,000 cubic meters. Ukraine says any increase should be phased in gradually and accuses Moscow of applying political pressure.

The bitter dispute comes one year after pro-Western president Viktor Yushchenko took power in Ukraine, leading to a strain in relations.

Roland Nash, with Russia's investment bank, Renaissance Capital, says there are both political and economic issues involved.

"Clearly its better for Gazprom to get paid more for its gas," he said. "But its more than coincidence that this takes place after a more pro-European, anti-Russian regime is in place in Ukraine."

The gas cut-off comes just as Russia takes over the G-8 group of industrialized nations for 2006.

President Vladimir Putin says his primary goal for the year will be to increase energy security, a logical step given Russia's position as one of the worlds major energy exporters. But the dispute with Ukraine is raising concern that Moscow can use its vast gas and oil reserves to apply undue political pressure on its customers.

Europe depends on Russia for up to half of its supply of natural gas, along with a large amount of its oil.

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