Europe warm to end of Russia - Ukraine gas war

20 January 2009

Bringing some cheer for Eastern Europe in the new year, Russian natural gas began flowing into Ukraine today, ending an almost two-week cutoff that had left large parts of Europe cold and dark in the deep January winter.

Russia's gas monopoly Gazprom announced that it had begun pumping gas into Ukraine in the morning ''in accordance with the agreements'' reached during the weekend, but officials said the shipments could take up to 36 hours to cross Ukraine and reach European customers. Europe receives about a fifth of its natural gas from Russia.

Russia halted the supplies on 7 January as it argued with Ukraine over 2009 gas prices and allegations that Ukraine was stealing gas destined for Europe.

More than 15 nations in the Balkans and Eastern Europe were left scrambling for alternative energy sources, with factories shut down and millions of people shivering in unheated homes. Bulgaria and Slovakia, in particular, rely almost entirely on Russia for gas.

There was no sign today of gas reaching downstream customers in Europe, but Austrian oil and gas giant OMV said in a statement that it expected deliveries of Russian gas to start arriving in Austria via Ukraine "shortly", bringing to an end the European Union's worst-ever gas crisis.

Gazprom confirmed that Ukraine had agreed to a major price hike, at least in the short term, in the contract signed on Monday. "In the first quarter of 2009, the price of gas for Ukrainian customers will be $360 per 1000 cu m. The price will change quarterly under the formula," Gazprom said.