Kiev gas row hurting Russian economy

MOSCOW, Dec. 23 (UPI) -- A row over Ukrainian gas debts is affecting the Russian economy by making Ukrainian goods more attractive on foreign markets, Gazprom officials said.

Russian energy giant Gazprom threatened Dec. 18 to cut off the gas supply to Ukraine unless Kiev paid outstanding gas debts. A similar row erupted in 2006, shutting off gas to Europe for about three days.

Around 80 percent of the Russian natural gas to Europe travels through Ukraine. A 2006 dispute between both countries disrupted European supplies for a few days during the winter.

Ukraine last week paid $1 billion of its $2.4 billion debt to Russian for gas from September through November. With December supplies, however, the total debt is now $3.2 billion, RIA Novosti reported Tuesday.

The failure to pay the debt is hurting the Russian economy because Ukrainian prices are falling in response, making the market more competitive, said Sergei Kupriyanov, a Gazprom spokesman.

"Ukraine's non-payment of gas is actually reducing the production costs for Ukrainian goods and making them more competitive on external markets, including Russia," he noted.

Ukraine had courted the European Union to intervene in the row. Russia had taken the matter to international court to settle the dispute, but Prime Minister Vladimir Putin changed course, threatening to cut off supplies in January.