EU, Ukraine plot next move in gas war with Russia

Kiev: Crisis-hit Ukraine and the European Union will try on Thursday to forge a joint stance at crunch talks with Russia in the latest gas war with its westward-leaning neighbour.

The meeting of Ukraine and EU energy officials in Brussels became even more critical after EU member Slovakia reported a 50-percent drop in Russian supplies following its decision to divert imports to Ukraine to help ease its spreading fuel shortage.

Europe`s top energy envoy will then try on Friday to convince both the Kiev and Moscow gas chiefs, during talks in Berlin, to strike a compromise before winter forces Ukraine to consider tapping into the Russian gas bound for Europe.

Russia cut its deliveries to Ukraine in mid-June after a pro-Western government took power, saying that Kiev had not been paying its bills on time.

Since then pro-Russia rebels have waged an ongoing separatist struggle in eastern Ukraine.

An acrimonious first round of talks in Berlin broke up last Friday with EU and Russian talk of an initial agreement being quickly quashed by Ukraine.

The EU energy commissioner said at the time that the "winter package" allowed Ukraine to purchase emergency supplies of gas at a reduced rate over six months.

This would give Moscow and Kiev time to negotiate a long-term contract and ways to settle Russia`s debt claim of $5.3 billion (4.2 billion euros) that Ukraine denies owing.

Russia`s energy minister said he thought a successful outcome on this occasion was likely.

But his Ukrainian counterpart stressed that Kiev rejected many of the conditions demanded by Moscow and laid out in last week`s EU plan.

"The European Commission has submitted its proposals. And we have submitted our slightly different ones," Ukrainian Energy Minister Yuriy Prodan said shortly before setting off for Brussels.Russia had warned before last week`s talks that it may be forced to cut European supplies because some countries were re-exporting gas to Ukraine in breach of their contracts with the state energy giant Gazprom.

EU officials protested against the warning and said its deals with Gazprom allowed the gas to be shipped freely to any interested client.

But Hungary immediately halted its limited shipments to Ukraine -- a decision Gazprom rewarded by boosting the former Soviet satellite`s gas supplies.

Slovakia refused to bow to the pressure and continued providing Ukraine with the largest quantity of gas provided by any of its western neighbours.

It was unclear whether the 50-percent cut in Russian deliveries that Slovak Prime Minister Robert Fico reported on Wednesday represented Gazprom`s response to Bratislava`s defiance.

The Slovak gas importer said suppliers blamed the drop on unspecified technical problems. Gazprom issued no immediate comment and its spokesman did not return calls.

But Fico warned that the situation would turn "very complicated" if Russian gas flows ground to a halt.Ukraine`s pipelines transmit just 15 percent of the Russian gas imported by Europe.

But EU powers such as Italy -- reliant on the Ukrainian link for all of its Russian supplies -- fear that Kiev may be forced to tap into those flows once the winter heating season begins.

Russia nearly doubled Ukraine`s gas price a few weeks after the February ouster in Kiev of a Kremlin-backed president who had earlier rejected a historic EU trade and political association deal.

Gazprom last year supplied Ukraine with 25.8 billion cubic metres of gas -- about half its needs -- at an average price to $413.50 per 1,000 cubic metres.

It promised in Berlin to lower that rate to $385.00 for six months as long as Ukraine makes a $2.0-billion down payment before deliveries resume.

Gazprom would like to see another $1.1 billion paid by the end of year. This would secure Ukraine 5.0 billion cubic metres of gas -- the minimum it needs to survive the winter.

Ukraine denies owing money to Gazprom and calls any transfers it makes "payments" for new deliveries.

It would also like to see gas flows resume before any payment and the $385.00 price be written into a new long-term contract -- two conditions Gazprom rejects.