Gazprom muscles in

Gazprom is threatening to reduce gas supplies to Ukraine by 25% from 0700 GMT on Monday.  This is the second time in three weeks that the Russian gas giant has flexed its economic muscle in order to force Kiev to settle its payment arrears. 

Russia says Ukraine has been getting gas since January 1 without a contract or payment and this cannot continue.  The two countries’ presidents appeared to cut a deal on February 12, but the payments that have been made since are for 2007.  Ukrainian Prime Minister Yulia Tymoshenko was to have reported last Wednesday to President Viktor Yushchenko on the government’s fulfillment of that agreement, but begged-off because she was ‘sick’.  The prime minister and president are political rivals, and neither wants the other to gain credit for putting the gas relationship with Russia on a proper footing.  Tymoshenko also doesn’t like aspects of the agreement Yushchenko brought back from Moscow, which includes letting Gazprom into the Ukrainian gas market. 

Kiev politicians are playing politics with the EU’s gas supply, about 25% of which transits through Ukraine.  But an accommodation by the deadline is likely, since neither Kiev nor Moscow wants to appear unreliable in the EU’s sight.