Europe begins to feel gas pipeline pinch

A spokesman for Ukraine's state company Naftogaz responded that the Russian cutoff caused a pressure drop in the line. On Monday, Ukraine suggested it may seek a huge increase in the fees it charges to transport Russian gas, to offset expected price hikes.

Russia says it has not received a Ukrainian arrears payment of $1.5 billion that Kiev says it made through an intermediary last week, and insists there was no alternative but to shut off supplies after Ukraine rejected Gazprom's offer of $250 per thousand cubic meters of gas for delivery in 2009. On Monday, Gazprom announced it will take its case against Ukraine to the Stockholm Arbitration Court, and appealed to the European Union to independently monitor Ukraine's stewardship over the gas pipeline.

"Ukraine is not only stealing our gas from the export pipes, it's also using gas from our joint storage facilities in Ukraine for its own needs," Gazprom deputy CEO Alexander Medvedev told the ITAR-Tass news agency. "We can't compensate these shortages in full."

The dispute is overshadowed by the growing geopolitical schism between Moscow and Kiev, especially since Ukraine extended military assistance to Georgia during last summer's Russia-Georgia war, and some suggest Ukraine might ease its position in the gas negotiations with a few political concessions. "Gas means big money, but it's also a pretext," says Dmitri Furman, an expert with the Institute of European Studies in Moscow. "Gas is just one manifestation of our colossal irritation with Ukraine ... for having chosen to build a different political system and join the West."

Experts say the conflict's real dynamics are hidden. The gas arrangement between Russia and Ukraine was never based on straightforward contracts between Gazprom and Naftogaz, but on dealings that could conceal massive corruption.

"There is no transparency [from either side]" says Alexei Kolomiyets, president of the independent Institute of Euro-Atlantic Integration in Kiev. "This may be to the benefit of highly placed figures in both countries, but we know that it alienates the Europeans."

Some Russian commentators suggest that the political and commercial rhetoric flying back and forth is secondary to the conflict's main movers. "Gazprom is a great machine of embezzlement and misappropriation of funds," says Mikhail Krutikhin, a partner with RusEnergy, a Moscow-based consultancy. "It makes very good money for some of its managers and a few associated politicians, but not for the country."

Mr. Krutikhin points says Ukraine pays Russia for its gas through as many as 12 intermediaries, making payments almost untraceable. It's no surprise that last week's check, supposedly sent by Ukraine, got lost in the mail, he says. "Virtually everything Gazprom does is some strange combination of politics, commerce, and graft."

The opaque business dealings also baffle the Europeans, who seem to be wishing the dispute would just go away.

"It isn't exactly that Russia is the evil energy-provider bear and Ukraine the innocent victim," says Henning Riecke, an expert at the German Council on Foreign Relations in Berlin. "Ukraine must be protected from collapse, and Europe needs to support Kiev – but without trying to take sides."

• Correspondent Jeffrey White in Berlin and staff writer Robert Marquand in Paris contributed.

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