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EU Urges Russia, Ukraine to Settle Energy Dispute

EU Urges Russia, Ukraine to Settle Energy Disputei
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Zlatica Hoke
May 03, 2014 12:06 PM
Russia's confrontation with the West over the growing unrest in eastern Ukraine could lead to another energy crisis in the European countries that are dependent on Russian energy. Europe gets about one-third of its gas supplies from Russia, and about half of it is dispatched through Ukraine. Meanwhile, as Zlatica Hoke reports, the EU is mediating a deal between Russia and Ukraine that would secure a steady gas supply for next winter.
EU Urges Russia, Ukraine to Settle Energy Dispute
Zlatica Hoke
Russia's confrontation with the West over the growing unrest in eastern Ukraine could lead to another energy crisis in the European countries that are dependent on Russian energy.  Europe gets about one-third of its gas supplies from Russia, and about half of it is dispatched through Ukraine.  Europeans are increasingly looking into alternative sources of energy to reduce their reliance on Russia.  Meanwhile, the EU is mediating a deal between Russia and Ukraine that would secure a steady gas supply for next winter.

The Ukrainian military effort to regain cities under pro-Russian rebel control has not gone as well as the government in Kyiv expected.  Acting President Oleksander Turchynov said the military has had to act with restraint in order to spare civilians.

"I would like to underline that the operation did not progress as quickly as hoped for, and was complicated by the fact that terrorist bases are situated in heavily populated cities, and that they were hiding behind citizens, hiding behind hostages and firing from apartment blocks," he said.

Heavily armed rebels shot down military helicopters on Friday, killing two pilots. British Ambassador to the United Nations Mark Lyall Grant said it is clear that Russia is arming the insurgents.  

"Peaceful activists do not have the means or the capabilities to shoot down three Ukrainian military helicopters, reportedly using MANPADS  [man-portable air-defense systems]," he said. 

Western leaders and Russia are accusing each other of failing to take steps to de-escalate the political crisis in Ukraine, as they agreed last month in Geneva.  Mike Ingram, a London-based market strategist, says it was not a solid agreement in the first place.  

"Frankly, I was amazed that anyone thought anything of use whatsoever had been agreed at the Geneva conference just over a week ago. I think the longer-term situation in Ukraine is partition. I don't believe that Ukraine is governable in its current shape," he said.

Russia is poised to send its forces across the border in support of pro-Russian separatists in eastern Ukraine.  If the West retaliates with more economic sanctions, Russia may respond by withholding energy supplies. German trader Fidel Helmer says that would not be wise.

"This could certainly have very negative consequences for Russia because the Europeans and the Americans are already in the process of finding alternatives for gas deliveries. This would, of course, mean that Russia would export less gas and therefore make less money, something they desperately need," said Helmer.

Ukrainian, Russian and EU energy officials met Friday in Poland to discuss how to avoid an energy crisis.  Russian Energy Minister Alexander Novak says his country may halt gas supplies to Ukraine for failing to pay its existing gas bills.

"The general debt for the supplied gas to Ukraine in accordance with the current contract is about 3.5 billion U.S. dollars. And this debt will increase in April by 1.3 billion dollars," he said.

Ukrainian Energy Minister Yuri Prodan blames the situation on Moscow.  He says Kyiv will seek justice.  

"If an agreement is not reached, we will meet [Russia's natural gas producer] Gazprom in a Stockholm court on May 28," he said. "According to our lawyers, Ukrainian debt to Gazprom may be changed during arbitration because of abusive acts by Gazprom in Ukraine's natural gas market."

Russia caused energy crises in Europe in 2006 and 2009 when it cut off supplies to Ukraine.  Representatives of all three are set to meet again later this month.

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