Russia cut off gas supplies to Ukraine on Sunday after Kiev rejected Moscow's demand for a sharp rise in gas prices for 2006, thus triggering a standoff between the two countries and causing gas shortfalls in some European countries.

 

Since Russia and Ukraine keep starkly different standpoints on the gas price hike, analysts say, it would be time-consuming for them to settle the dispute, even if negotiations are resumed swiftly.

 

The EU and the US issued statements on Monday to appeal to Russia and Ukraine to restore talks as soon as possible.

 

Russia transfers 112 billion cubic meters of gas to other European countries each year through pipelines crossing Ukraine. Ukraine paid Russia US$50 for per thousand cubic meters of gas in recent years, which Russia says is too low.

 

Last May, the two countries launched negotiations on gas price and Russia's payments to Ukraine for using its pipelines, but the talks stopped short of any substantial progress.

 

Russia wanted the gas price to be raised to US$230 per thousand cubic meters, while Ukraine has rejected. Instead, it insists US$75 to 80 per thousand cubic meters of gas is a proper price.

 

Subsequently, Russia's biggest oil company Gazprom cut off gas supplies to Ukraine on Sunday after negotiations broke down over the price dispute.

 

Observers attributed the gas dispute to both economic and political factors.

 

In recent years, the international oil and gas prices kept rising, but the gas transit fee did not rise much. Therefore, Russia wanted to sell gas to European countries west of Ukraine in 2006 at the price of US$230 to 265 per thousand cubic meters of gas to offset its losses.

 

Russia insists it is not a high price to demand US$230 from Ukraine a thousand cubic meters of gas, as Russian experts estimate the country suffers a loss of US$3 to 4 billion for favors given to Ukraine in gas export.

 

Moreover, Russia's gas price for civilian usage is even higher than that in Ukraine, so the Russian government has been under constant public pressure at home to lift the price for gas exported to Ukraine.

 

Ukraine consumes about 80 billion cubic meters of gas each year, among which three-fourths is imported. Economists say if price for imported gas in Ukraine is over US$160 for per thousand cubic meters, the country's backbone industries such as metallurgy, chemicals and machinery will risk collapsing, and the national economy will suffer a heavy blow.

 

Ukraine is unsatisfied with the fact that Russia still sells gas to other former Soviet republics in 2006 at a price lower than 120 dollars per thousand cubic meters, saying Russia's price offer to it is unacceptable.

 

Though Ukraine has agreed to buy gas from Russia at the market price, the country required that the price be raised step by step to render a transition period for its domestic companies, which Russia did not consent.

 

In the political aspect, the Russia-Ukraine relations have experienced a strain since January 2005, when Viktor Yushchenko came to power after a re-run of the presidential elections.

 

Yushchenko, taking the country's entry into NATO and EU as diplomatic priorities, has made clear that it would try to join NATO before the end of 2008, which has displeased Russia greatly as the latter fears NATO's expansion would harm its interests.

 

Russian President Vladimir Putin recently asked rhetorically: If Ukraine's leader insisted on joining the alliance, why should Russia pay its bills?

 

Russia is also infuriated by Ukraine's moves in some other affairs. Ukraine has continuously criticized the affairs of the Commonwealth of Independent States, in which Russia plays a major role. Ukraine also gave a cold shoulder to Russia's advocation of building a common economic bloc among the four biggest ex-Soviet economies, including Ukraine.

 

Ukraine, which produces 20 billion cubic meters of gas every year, is capable of meeting its domestic demands comfortably, but some of its big companies have begun to reduce gas supplies to households on the grounds of Russia's gas cutoff, thus bringing about an anti-Russia public sentiment in Ukraine.

 

Analysts say that Ukraine and Russia are interdependent as to the gas issue. Ukraine needs Russia's gas, while Russia has to export gas to other European countries via Ukraine. The two countries, as well as other gas-consuming nations concerned, hope to settle the dispute as quickly as possible, but many believe it isn't an easy task at all.

 

Critics here say, however, it is highly possible for Russia and Ukraine to work out a compromised settlement to serve all sides' interests, as the two neighboring countries have after all to maintain and develop their relations.

 

(Xinhua News Agency January 4, 2006)