Russian gas reaches Europe again via Ukraine

Russian gas started reaching Europe via Ukraine yesterday for the first time since a contract row between Moscow and Kiev cut supplies to about 20 European countries two weeks ago.

Slovakia, which borders Ukraine, said gas had started arriving, though Kiev said it could be up to 36 hours before supplies reach other parts of Europe, where some countries have been forced to ration supplies to customers.

"Gas is not only flowing in the direction of Europe but it is flowing to Europe," Gazprom deputy chief executive Alexander Medvedev told a conference call with reporters.

Ukraine confirmed it was receiving gas from Russia and said it would deliver it to Europe as quickly as possible.

In EU member Slovakia - which was badly hit by the cut-off and briefly considered re-starting a Soviet-era nuclear reactor - Economy Minister Lubomir Jahnatek said supplies had started arriving.

The gas dispute had reflected political tension between Moscow and Kiev, with Russia opposed to formerly Soviet Ukraine's aspirations to join the Nato military alliance.

Gazprom said that under the new contract Ukraine would pay €277 per 1,000 cubic metres of gas in the first quarter of this year, a sharp rise on the €137 that Kiev was paying for Russian gas last year.

The new price is likely to come down later this year as gas tracks falling oil prices, but it could still be a huge burden for a Ukrainian economy struggling with debt and sharp falls in the hryvnia currency.

Yulia Tymoshenko said on Monday she expected the average price over this year to be around €177 and €192 per 1,000 cubic metres.

Gazprom chief executive officer Alexei Miller warned if Ukraine were to fall behind in its payments, the firm would raise the price and demand Kiev pay for all its gas in advance - sanctions that could cripple the fragile Ukrainian economy.

Fears persist that bitter infighting in Kiev could cause the deal to unravel. Aides to Ukrainian President Viktor Yushchenko - a bitter rival to Ms Tymoshenko - accused her of signing an agreement that would hurt the economy.

But Mr Yushchenko's deputy chief of staff Oleksander Shlapak said the president lacked the legal authority to annul the deal. "The prime minister has taken on herself all responsibility for these decisions," Mr Shlapak said.