Moscow and Kiev failed to reach an agreement on a new gas contract for 2009 on December 31, which led to Russian energy giant Gazprom suspending supplies to Ukraine on January 1. Gazprom cut off supplies to Europe a week later saying Ukraine was stealing gas intended for EU consumers.
Following mediation by the EU the two sides agreed to resume supplies, however a test delivery failed on Tuesday and Russian gas via Ukraine has so far failed to reach the EU, leading Moscow to accuse Kiev of blocking the gas deliveries.
UKRAINE ON THE DEFENSIVE
Ukrainian Prime Minister Yulia Tymoshenko reassured the European Union on Wednesday that Ukraine remained a reliable transit country for Russian gas.
"Ukraine is interested in being perceived by Europe as a reliable Russian gas transit partner," Tymoshenko told a government session on Wednesday.
Ukraine has claimed that Russia has not sent enough "technical gas" to maintain the pressure necessary to send the required volumes to Europe. Kiev also said that Moscow had demanded gas for Europe be sent along a complicated route that would require Ukraine to cut off domestic supplies.
Tymoshenko urged Kiev and Moscow to reach an agreement on a new gas contract at bilateral talks without Europe's mediation.
"Talks on a contract for natural gas supplies to Ukraine are a bilateral issue, and Ukraine and Russia should cope on their own," Tymoshenko said at a news briefing, in an apparent contradiction of Ukraine's energy minister.
Yuriy Prodan said on Tuesday he had secured the European Union's preliminary consent to mediate in the ongoing gas dispute between the two former Soviet neighbors, which has hit European consumers hard.
RUSSIA SHIFTING RESPONSIBILITY?
"We hear our Ukrainian colleagues say there are some problems, but these are not our problems. They [Ukrainians] should solve these problems on their own," the Russian prime minister said.
Commenting on the concerns of his European partners at a Wednesday meeting with his counterparts from Slovakia, Moldova and Bulgaria, Vladimir Putin said Moscow's row with Kiev was only about gas supplies to Ukraine itself, not about gas flow through the country.
"This is a conflict over supplies, conditions and the price of gas for Ukraine itself," the Russian premier said.
Gazprom earlier said that as Ukraine had refused an earlier preferential price of $250 per 1,000 cubic meters it would now have to pay "the average European market price of $450-470," a condition Tymoshenko dismissed as "unacceptable."
Russian Deputy Prime Minister Igor Sechin said Gazprom's losses sustained over Ukraine's refusal to transit Russian gas to Europe had reached $1.2 billion.
He said Russia is considering alternative routes for gas supplies to Europe, including from West Siberia.
The Russian premier said that Ukraine had taken European gas consumers hostage by refusing to transit gas through the country. He also urged the European Commission to put more pressure on Kiev to ensure gas transits to Europe via Ukraine.
"European Commission members could put more pressure on the transit country to secure the interest of EU members," Putin said.
He also said Russia was ready to consider other scenarios to resume gas flows to Europe.
EUROPE HIT, THREATENS LEGAL ACTION
The crisis has hit about 20 EU countries in the height of winter, forcing them to close schools, factories and leaving householders without heating.
European partners are losing trust in Ukraine over problems with Russian gas transits to the EU, the Slovak prime minister said.
"I told [Ukrainian Prime Minister] Tymoshenko: Ukraine is losing the trust of European partners due to its behavior," Robert Fico said, adding that his country was not going to judge who was to blame in the Russia-Ukraine gas dispute.
European Commission President Jose Manuel Barroso was reported to have called the crisis "unacceptable and incredible" and warned the EU could advise energy firms to sue Russian and Ukrainian energy companies unless gas supplies were restored quickly.
Slovakia, one of the worst-hit EU member countries, also proposed a gas swap deal, under which Ukraine would deliver gas to the country from its own underground storage depots, with Russia compensating Kiev by sending equal volumes at a later date.
"Gazprom said such technical possibilities exist and if Ukraine approves the idea, we will be ready to put it into practice as soon as possible," Russian President Dmitry Medvedev assured the premiers of Bulgaria, Slovakia and Moldova.
Greece hinted on Wednesday it would seek compensation from Russia over shortages in gas deliveries.
What will be the result of the current Russian-Ukrainian ‘gas war'? (Poll)
