Ukraine bends to Russian Premier Putin gas threat

Hurriyet Daily News with wires

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The Russian premier also said the cutoff could affect supplies to Europe. In response to Putin’s threat, Ukraine's Naftogaz said it had sent the final installment of the $360 million it owed for gas consumed in February, and Gazprom confirmed it had been paid in full, according to The Associated Press.

Ukraine's ability to pay has been undermined by a severe economic crisis. Clouding the situation, Ukraine's national security service searched the offices of the gas company, Naftogaz, on Wednesday in a raid seen as part of a political fight between the president and prime minister that could hinder payments to Russia.

Putin said on television that the raid "is a source of extreme concern."

"If as a result of law enforcement actions and arrests of a number of officials there will be no payment (for Russian gas deliveries), it will lead to the stoppage of our energy deliveries to our customers in Ukraine as well as customer in Europe," Putin said in Moscow.

About 20 percent of the gas consumed in Europe comes from Russia via pipelines that cross Ukraine. A dispute between the two countries over payments caused a two-week cutoff of Russian gas to much of Europe this winter before it was resolved. The national security service is controlled by President Viktor Yushchenko. He is locked in a bitter struggle with Prime Minister Yulia Tymoshenko, whose government controls Naftogaz.

Second raid attempt

Ukrainian security agents showed up yesterday at the main office of a Naftogaz branch, Ukrtransgaz, as part of what officials have called an investigation into alleged diversion of huge amounts of Russian gas. A Naftogaz spokesman, Ilya Savin, said the group left the company's premises after about an hour after a standoff with members of parliament who had rushed to the scene. SBU spokeswoman Maryna Ostapenko had earlier said SBU officers were conducting an investigation "within the framework of a criminal case over abuses in the gas sector".

Timoshenko, addressing her cabinet, said the security forces were out of control and acting at the president's behest. "The prosecutor's office is doing nothing because it has its own interests, the SBU is blatantly breaking the law and the president is covering up for them. This is not merely a violation of the constitution, but in essence the destruction of the foundation of the state's legal norms," Reuters quoted her as saying.

The president's spokeswoman on Wednesday said the SBU's first raid on Naftogaz had acted within the law. Yushchenko has criticized the PMfor her conduct in clinching a deal in January under which Ukraine is to pay far more for imported Russian gas. Tymoshenko initially said Wednesday's action by security forces was part of a new row over the takeover by customs of 11 billion cubic meters of gas from RosUkrEnergo, an intermediary eliminated from the gas trade under the latest deal. The wider political battle that has impeded an effective response to the financial crisis in Ukraine, one of the worst performing economies in Europe.

Industrial output slumped by over one-third in January, year-over-year, and the currency lost about 43 percent of its value since September.