- The Observer, Sunday January 1 2006
The bitter energy dispute between the two countries threatens supplies into the European Union, with repercussions for the amount that would reach the UK.
Gas prices in this country are already due to increase by a further 15 per cent this year, putting many bills up to £1,000 a year, after two years of big price rises.
The dispute could affect countries across Europe, with EU gas experts due to meet on Wednesday to discuss the problem. Around 80 per cent of Russian gas exports pass through Ukrainian pipelines, and it is not known how these will be affected if the situation worsens.
Britain does not receive direct supplies from Russia, but 25 per cent of the EU's supplies comes from the Ukraine. If there is a drop in the supply to Europe, this would mean less gas being pumped through the interconnector, the pipeline that links the UK with the continent.
The problem turned into an impasse after Ukrainian leaders in Kiev turned down an offer from the Russian President Vladimir Putin to fix prices at their current levels until April, before raising them to more than four times the present rate - more than twice what neighbouring countries pay.
Ukraine has enjoyed relatively cheap gas from Russia because the pipelines go through its territory, but political tensions between the countries have led to the dispute over energy pricing. The price demand is seen as punishment by Russia of Ukraine's desire to join Nato and become much closer to the EU, following its Orange Revolution in which a Russian backed presidential candidate was defeated.
Russia's gas monopoly Gazprom had threatened to cut off supplies to Ukraine by 7am today if no deal was reached. Ukraine's President, Viktor Yushchenko, had asked for a 10-day delay on Friday but this was rejected.
Under the deal, drawn up by Putin at a meeting of his powerful security council, Kiev was offered the current price of $50 per 1,000 cubic metres of gas until April, when it would rise to $230.
The EU relies on Gazprom for 25 per cent of its gas. Most of this is transported via Ukraine. If Russia makes good its threat to cut off Ukraine's supply, it will reduce the amount of gas sent through the pipeline - which also carries Europe's share.
Earlier this week, Ukraine's Prime Minister, Yuri Yekhanurov, said Kiev would take 15 per cent of the Russian gas crossing its ter ritory if Moscow cut delivery for Ukrainian domestic use.
