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By Samuel R. Avro on Jan 4, 2009 with no responses

Russia’s Gazprom Files Lawsuit Against Ukraine Over Gas Dispute

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The ongoing dispute over natural gas contracts between Russia and Ukraine is being felt across a large portion of Europe.

Russian energy giant Gazprom, the world’s leading extractor of natural gas, filed a lawsuit against Naftogaz Ukrainy over the ongoing dispute which has caused shortages of natural gas across Europe.

Russia cut off the supply of natural gas to Ukraine on Thursday after the two sides couldn’t reach an agreement over $2 billion in payments which Russia says is still owed to them.  The Ukrainian state-run company flatly denies owing the money and in the meantime is keeping its country supplied with what is remaining in their storage facilities.

“Gazprom has taken the decision to file a lawsuit with the Stockholm international arbitration court to force Naftogaz Ukrainy to secure unimpeded transit of Russian gas to Europe across Ukraine,” Gazprom management committee chairman Alexey Miller said in a statement on Gazprom’s Web site.

Since Gazprom’s supply pipeline to Europe travels via Ukraine, many European countries have been feeling the effect of the row between the two countries.

Bulgaria, Hungary, Poland, and Romania said that gas supplies from Russia through pipelines in Ukraine have dropped since Gazprom cut off supplies to Ukraine.

Naftogaz Ukrainy, however, said that the fall of gas supplies to Romania, which suffers the most, was caused by “technical reasons.”

The Ukrainians contend that the price which Russia is currently asking for is more than double that which was agreed upon in October of last year.

Russia's natural gas monopoly, Gazprom, headquarters in Moscow.

“Such a price for natural gas, as for Ukrainian consumers, is an unprecedented economic pressure,” Naftogaz Chairman Oleg Dubyna said. “It blocks the work of not only industrial and communal enterprises, but also the operation of the gas transport system and in the end of the day can lead to ecological and humanitarian catastrophe.”

On Friday, the Russians accused Ukraine of siphoning gas in transit. They blamed the shortages across europe on what they say the Ukrainians have stolen. Ukrainian officials denied the accusation, saying that they are withdrawing only enough gas to operate pumping stations serving the pipelines.

The Ukrainians believe that the only way out of this disagreement is to involve the European Union (EU).

“We have missed all deadlines to sign an agreement between Ukraine and Russia ourselves,” the Naftogaz chairman said. “We probably need the EU to be involved in the process.”

The Russians, however, would like to take care of it between themselves.

“We implore Ukraine to come back to Moscow to negotiate once and for all a mutually acceptable gas supply deal,” , Gazprom Deputy Chairman Alexander Medvedev said in an e-mailed statement.