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Ukraine's Naftogaz said Wednesday it could start confiscating Russian natural
Ukraine's Naftogaz said Wednesday it could start confiscating Russian natural gas meant for European consumers after January 1 if no new contract is agreed for 2009.

The threat is contained in a letter written by the Ukrainian energy company to Russian energy giant Gazprom. The former Soviet states are currently in last-ditch talks on Ukraine's outstanding debt for gas supplied by Russia and to agree a price for deliveries in 2009 before the January 1 deadline.

"Today, Ukraine's Naftogaz sent an official letter to the management of Gazprom. The letter states that unless gas transit and supply terms are agreed in the near future, and should the relevant documents not be signed, Naftogaz has no legitimate grounds to accept into Ukraine's gas transportation system Russian natural gas and move it via Ukraine's customs border," a source in Kiev said on Wednesday.

The 2006 gas row between the two former Soviet states resulted in a brief cutoff in supplies to Ukraine. When shortages were reported in some East European countries, Russia accused Ukraine of siphoning off Europe-bound gas. Ukraine transits about 80% of Russia's gas to European consumers.

Russian energy giant Gazprom confirmed it has received Ukraine's warning over gas transits to the European Union.

Gazprom on Tuesday reiterated its demand that Ukraine pay a $2 billion debt, a sum that includes fines accumulated for delays in payments, threatening to start reducing supplies as of January 1, 2009.

Gazprom said on Wednesday the threat by Kiev to confiscate Russian gas bound for European customers via Ukraine, if no new agreement is reached, was tantamount to blackmail of Russia and European consumers.

Spokesman Sergei Kupriyanov said: "This is a grave violation of the existing agreement on Russian gas transits to Western Europe, or simply put, blackmail by Ukraine of Russia, as well as Western European countries."

Kupriyanov also said Gazprom believes there is a 70% chance that no new gas deal will be signed with Ukraine by the end of the year.

"Frankly speaking, the letter [from Ukraine's Naftogaz] informing us that transit gas could be confiscated changed the 50-50 probability to 70-30 in favor of a crisis scenario," he said.

Kupriyanov said Gazprom is ready to continue talks with Ukrainian oil and gas company Naftogaz on natural gas supplies in 2009. "For as long as our Ukrainian colleagues are ready to continue them [the talks], we will definitely be there," he said.

Kupriyanov said the existing contract for natural gas supplies to Ukraine will expire at 10:00 a.m. (07:00 GMT) on January 1, 2009. "It expires today [December 31]. But in accordance with the agreement, the calculation is based on the designated 24-hour time frame from 10 a.m. to 10 a.m.," he said.

A first deputy CEO of Gazprom said on Wednesday the letter from Naftogaz puts into question whether Kiev would honor its transit contract on supplies of Russian gas to Europe.

"The Ukrainian side today placed a question mark over the current contract on Russian gas transits to Western Europe, threatening us 'in black and white' with confiscating gas," Alexander Medvedev told a RIA Novosti press conference.

Medvedev also said Gazprom had offered Ukraine a lower price for Russian gas. "We have made Ukraine an extremely good [price] proposal," he said.

He did not elaborate on the figure, only saying it was much lower than the earlier announced price of $418 per 1,000 cubic meters. Ukraine, which paid $179.5 in 2008, has refused to accept the latest price, Medvedev said.

He said Ukraine has transferred $1.5 billion of its gas debt to intermediary trader RosUkrEnergo, but Gazprom has not yet received the money.

"RosUkrEnergo has received $1.5 billion in its account. We hope that RosUkrEnergo will fulfill its obligations and the money will be transferred to Gazprom's account," Alexander Medvedev said.

A spokesman for the Ukrainian government said on Wednesday Ukrainian Prime Minister Yulia Tymoshenko was on her way to Russia for gas talks.


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