Natural gas rose and the ruble declined as Russia’s shipments of gas to Europe were halted for an eighth day in its dispute with Ukraine over prices and transit fees. Slovakia and Bulgaria, hit hardest by the cutoff, sent their prime ministers to attempt to break the deadlock. Slovak leader Robert Fico said his nation, which relies solely on gas flowing through Ukraine, will run out of fuel in 12 days. Gas prices in the U.K., the region’s largest market, rose for a second day after the collapse of a deal brokered by the European Union to resolve the dispute. OAO Gazprom, Russia’s gas exporter, declared force majeure on deliveries through Ukraine, allowing it to renege on supply contracts, after halting flows last week. “Instead of just saying ‘we want our gas’, the Europeans need to do something to change the dynamics,” Andrew Neff, senior energy analyst at Global Insight, said from Ankara. NAK Naftogaz Ukrainy, the state energy company, said it was again unable to meet a Russian request to pump gas across its borders without jeopardizing domestic supplies. U.K. gas for delivery next month increased 1.3 percent to 58.50 pence as of 1:33 p.m. London time, according to broker Spectron Group Ltd. Prices surged 24 percent last week after Gazprom turned off the taps. The ruble slid as low as 31.8730 per dollar today in Moscow, the lowest in six years, compared with 31.3087 yesterday. Diverting Gas Russia stopped flows through Ukraine on Jan. 7 after negotiations over a supply deal broke down. Russia complained that its western neighbor was diverting gas bound for Europe and had closed down its pipelines, charges denied by Ukraine. Gazprom estimates it has lost $1.1 billion in export revenue since the start of the year. The EU threatened to urge companies in the 27-nation bloc to seek legal remedies if a settlement isn’t reached. The cutoff has already led to renewed calls for region to diversify its sources of energy away from Russia. The actions of Russia and Ukraine suggest both are incapable of delivering on their commitments to the EU, European Commission President Jose Barroso said. “We’ll see very soon whether there is a technical difficulty or whether there is no political intention to honor the agreement,” Barroso said today in Strasbourg, France. “It will be clear if indeed there is or not the political will to fulfill the commitments.” Refused Request Gazprom said Naftogaz once more refused to accept gas from Russia for shipment to European consumers. “No transit country has the right to abuse its status,” Russian Prime Minister Vladimir Putin said after meeting his counterparts from Moldova, Slovakia and Bulgaria. He accused Ukraine of holding European consumers to ransom. Ukraine demanded 1.5 billion cubic meters of gas for free in the first three months of the year to resume transit to Europe, Gazprom Chief Executive Officer Alexei Miller said on state television. That volume of gas would amount to giving Ukraine a $700 million present, Miller said. Naftogaz said it would have been forced to curtail domestic gas supplies if it had agreed to transport gas through an export route requested by Gazprom today. Domestic Supplies “They want to pump gas diagonally across our territory,” interfering with domestic supplies, Naftogaz spokesman Valentyn Zemlyanskyi said in a phone interview. The Russian company had proposed sending 98.8 million cubic meters of gas today through Ukraine, via the Sudzha pumping station. Naftogaz wanted Russian flows to be sent to the Valuyki and Pisarevka stations. Naftogaz would be prepared to pay for “transit gas” needed to operate the pipeline system, when an accord is reached, CEO Oleh Dubina told a news conference in Kiev. Slovakia is using imports and backup generators to avoid a blackout following the supply cut and an unplanned halt at a coal-fed power station. Ukrainian Prime Minister Yulia Timoshenko today rejected Fico’s request to deliver gas to Slovakia from storage, saying Ukraine can barely meet domestic demand. Bulgaria has slashed daily consumption by more than half, using gas from reserves to meet demand, shut 72 factories and rationed gas for heating utilities and 150 other companies. Moldova has also imposed curbs on gas use. ‘Humanitarian Crisis’ The EU should step in and pay for the 140 million cubic meters of gas Gazprom accuses Ukraine of having diverted, said Jonathan Stern, director of gas research at the Oxford Institute for Energy Studies. “Southeast Europe is facing a humanitarian crisis, he said. “We have got to get gas to them so they can keep warm, cook food and generate power. The EU should give Russia that money.” Ukraine said it’s ready to transport gas to Europe as soon as Gazprom starts pumping the fuel. “Ukraine has never blocked gas from Russia,” Timoshenko said. “We are ready for transit.” Gazprom’s overall deliveries to Europe fell by about 60 percent when it halted transit flows and supplies to Ukraine’s domestic market were suspended Jan. 1. Price Increases Alexander Medvedev, Gazprom’s deputy chief executive officer, earlier this week said Gazprom is “open to discussions” to agreeing a solution on supplies to its neighbor. Timoshenko said she favors gradual price increases for Russian gas imports. Gazprom offered a price of $450 per 1,000 cubic meters after it said Ukraine rejected an offer, subsequently withdrawn, of $250. Medvedev said $450 was for the first quarter. Gazprom’s prices to European customers under long-term contracts typically lag behind prices for crude and oil products by about six to nine months. Crude has fallen by more than 70 percent since reaching a record in July. Ukraine paid Russia $179.50 per 1,000 cubic meters for gas last year. In 2006, Russia turned off gas exports to Ukraine for three days, causing volumes to fall in the EU, and also cut shipments by 50 percent last March during a debt spat.

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