Russia's dispute with Ukraine over natural-gas prices descended into legal threats as five European Union countries and Turkey said they had begun to record slight supply disruptions.
Russia's OAO Gazprom halted deliveries to Ukraine -- a key transit country for Russia's lucrative gas trade with the EU -- on Jan. 1, after talks to negotiate a new supply contract for this year broke down amid a price dispute.
Since then, Poland, Hungary, Romania, Bulgaria, the Czech Republic and Turkey have reported slightly reduced supply. Gazprom says it is pumping extra gas via Belarus and Turkey to ensure supply, while Ukraine says it is using its reserves to maintain transit volumes. The EU gets 80% of its Russian gas imports via Ukraine.
The dispute has forced both countries to defend their reputations as reliable energy suppliers to the EU and evoked memories of 2006, when a similar dispute led to more serious supply disruptions in Europe.
Russia and Ukraine each said the other was to blame for a shortfall of about 50 million cubic meters that failed to reach European consumers over the weekend. That's about a sixth of what Russia pumps to Europe every day.
Gazprom said President Dmitry Medvedev approved its plan to bring a case at the International Arbitration Court in Stockholm against Ukrainian gas company Naftogaz Ukrainy to ensure unimpeded transit. In a statement, it said it would file the case "in the near future." Naftogaz said it would counter file at the same court if Gazprom went ahead.
Bohdan Sokolovsky, an economic aide to Ukrainian President Viktor Yushchenko, said the dispute could trigger more serious supply shortfalls in Europe in 10 to 15 days if a deal isn't struck.
The EU has so far refused Ukrainian requests to arbitrate, calling on Moscow and Kiev to settle their differences bilaterally. An extraordinary meeting of EU envoys is scheduled for Monday to exchange information on the situation.
Late Sunday, face-to-face talks between the two sides had yet to resume. Talks broke down on New Year's Eve after Ukraine rejected a Russian proposal that Ukraine should pay $250 per thousand cubic meters in 2009, up from $179.50 last year, but still around half the price paid by EU countries. Ukraine proposed a smaller increase to $201, but has since said it is ready to pay $235.
Also in dispute are back payments that Gazprom says Ukraine owes. Ukraine has delivered $1.5 billion for unpaid 2008 bills to an intermediary company that is 50%-owned by Gazprom. Gazprom, however, says it doesn't expect to get the funds until Jan. 11. Gazprom also says Kiev owes $614 million in late-payment fines; Ukraine says it owes no late fees.
After saying Thursday that it wanted Ukraine to pay $418 per thousand cubic centimeters of gas, Gazprom upped the ante Sunday. Chief Executive Alexei Miller said the company now wants Ukraine to pay $450 per thousand cubic meters, equivalent to what its closest EU neighbors pay, less transit across Ukraine. He said he hoped that price would bring the Ukrainians back to the negotiating table.
Ukrainian officials say that accepting such a steep price increase when the country's economy is being hurt by the global downturn would lead to "humanitarian catastrophe." Ukraine's inefficient Soviet-era domestic heating systems and industries are heavily reliant on Russian gas imports to function.
In recent years Gazprom has raised gas prices toward world levels for all of its ex-Soviet neighbors, who continued to enjoy heavy discounts after the breakup of the Soviet Union. Less-compliant neighbors, such as Georgia, now have to pay full price, while allies such as Armenia pay lower rates. The annual negotiations with Ukraine have been particularly difficult, however.
Moscow has pressed Ukraine's pro-Western government to pay world prices since Mr. Yushchenko came to power in the 2004 Orange revolution. But Ukraine has used its leverage as a critical transit country for Gazprom to reach the rich EU market to push for more gradual increases.