Russia ready to restart gas to Europe

Russian Prime Minister Vladimir Putin struck a deal early today with the European Union on supervising the flow of natural gas through Ukraine, paving the way to restart shipments to fuel-starved European customers.

The price dispute that first drove Russia to cut off gas to Ukraine on New Year’s Day had yet to be resolved, and there was no word on how soon gas deliveries to Europe would start up again. There was no immediate response from Ukraine.

Still, European officials said they expected Russia to resume gas deliveries. The agreement calls for monitors to ensure that Ukraine doesn’t siphon fuel en route from Russia to the EU.

Fuel shortages worsened in the last two days, after Gazprom, the Russian gas monopoly, stopped pumping gas through pipelines that cross Ukraine. In Eastern Europe, schools and factories were forced to shut down, and in some regions shivering families scrounged for wood and coal to heat their homes.

Analysts say Russia is under pressure to resolve a stalemate that has badly tarnished its reputation in the West. Though both Ukraine and Russia are losing cash and taking harsh criticism from angry European leaders, Russia, where the economy depends heavily on supplying about a quarter of Europe’s gas, stands to lose the most, observers say.

Russia said deliveries had to be halted because Ukraine was stealing European-bound fuel and blocking pipelines; Ukraine denies the accusations. Experts say it’s impossible to know which country is telling the truth.

“There’s been a lot of damage done to Russian credibility as a gas supplier, whether deserved or not,” said Jonathan Stern, director of gas research at the Oxford Institute for Energy Supplies. But, he added, “even people like me, who’ve been following this minute by minute, don’t know who to believe.”

Still, he said, Russia comes in for criticism because Gazprom resorted to a shutdown instead of allowing gas delivery while negotiations continued.

“You don’t stop the gas just because you don’t agree about a price,” Stern said.

Russia is certain to face lawsuits from Europe for failing to fulfill contractual obligations to its customers. Ukraine will also be dragged into litigation -- Moscow has already filed a lawsuit in arbitration court over accusations of siphoning gas. Both countries’ reputations as fuel providers are suffering.

The two appear determined to score political points, or at least to inflict political damage on each other. Putin appeared on state television this week ordering the gas shutdown, leaving no room for doubt that Gazprom’s actions were being directed from the top.

Beneath the veneer of commercial interests lurks a contentious diplomatic war that has raged quietly between the two former Soviet states as Ukraine inched closer to the West and a resurgent Russia worked to regain influence in the region.

Ever since 2005, when large-scale demonstrations helped oust Ukraine’s Moscow-backed leader and brought pro-Western President Viktor Yushchenko to power, ties between the two governments have been fractious. To the outrage of Russia and the consternation of some Ukrainians, Yushchenko has stridently criticized Moscow and angled to have Ukraine join the North Atlantic Treaty Organization. The personal animosity between Yushchenko and Putin has seeped into the dispute over natural gas, analysts say.

“However harsh it may sound, it seems to me that the current Ukrainian political leadership is demonstrating its inability to solve economic problems, and today’s situation highlights the high criminalization of its authorities,” Putin said Thursday.

Some analysts accuse Moscow of using the dispute to apply pressure on Ukraine economically and politically and to show Europe that Ukraine is an unreliable state.

“Russia would like to put Ukraine on its knees, increase its influence in Ukrainian politics and to represent Ukraine as an unreliable partner in its relations with the EU,” said Oleksiy Haran, a political science professor at Kiev-Mohyla Academy in Ukraine. “Even psychologically, it’s important to them to humiliate Yushchenko and Kiev.”

Other observers say it’s not that simple.

Clashes over gas prices are a frequent manifestation of Russian annoyance with Ukraine. In the winter of 2006, Russia cut off gas to Ukraine amid a pricing standoff and met with searing critiques from the West, which accused Moscow of trying to use its natural resources as a weapon to bludgeon Ukraine into compliance.

That first gas shutdown interrupted fuel supplies in Europe, deeply rattling the region and encouraging governments to stockpile gas reserves and look for other fuel sources.

“Russian leaders are painfully aware . . . that many in the West would be quick to jump on the anti-Russia bandwagon and claim that Russia was once again using energy as a political weapon to pressure Ukraine,” said Jacqueline Miller, a Russia expert and deputy director of policy innovation at the EastWest Institute think tank. “They’ve been down this path before.”

With anxiety rising and temperatures falling, few in Europe seemed to care who was to blame. European leaders unleashed their ire on both Russia and Ukraine, calling urgently for a resolution.

“This is a dispute between two countries,” Hungarian Prime Minister Ferenc Gyur- csany said, urging the EU to impose a solution on Moscow and Kiev, “but the bullets are hitting us and this is unacceptable.”

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megan.stack@latimes.com