Gazprom Promises To Restore Gas To Europe (VIDEO)

02/09/2009 05:12 am ET | Updated May 25, 2011

Gazprom pledged to restore gas to Europe on Thursday, on the condition that international monitors check supply flows in Ukraine, reports Spiegel. This could mean an end to the conflict which has threatened a renewed Cold War.

Once monitors are in place, "we will immediately resume gas supplies to Europe," Gazprom Chief Executive Alexei Miller said at a news conference Thursday in Brussels. He said Gazprom would hold additional face-to-face talks with the Ukrainian gas company Naftogaz later on Thursday when the heads of the two firms fly to Moscow together from Brussels.

According to European Commission energy expert Heinz Hilbrecht, the Commission is currently holding talks with industry in order to find possible monitors. These talks will be completed by Thursday evening, he said. After that, a plan must be drawn up to determine which Ukrainian pipeline stations are to be monitored. "I hope that this will only be a question of two to three days," Hilbrecht said.

Jerome Guillet and John Evans write in the Financial Times how Russia and Ukraine got to this point and why neither side can win a prolonged gas war.

The Soviet gas industry was born in Ukraine in the 1930s and the infrastructure was built from there. Ukraine remained a central part of the gas pipeline network even as the focus of activity moved to western Siberia. Carving up the Soviet Union along along the borders of its former republics made for an often unworkable allocation of physical assets. Vital assets for Gazprom, the Russian gas monopoly, are located in Ukraine and thus no longer under its direct control: the pipelines are an obvious item, but, just as significantly, Ukraine controls most of the storage capacity of the Russian export system. On the other hand, Ukraine, a heavy industry country, has mostly depleted its gas reserves, making it dependent on gas from Siberia.

So this is a situation of mutual dependence. Russia needs Ukrainian infrastructure to honour its export contracts to Europe, and Ukraine needs Russian gas. In case of conflict, withholding gas (from Russia's side) or shutting down export infrastructure (from Ukraine's) are tempting options, which have been taken up repeatedly since the demise of the Soviet Union.

Watch this video by Russia Today on the Gazprom crisis. It states that Kiev and Moscow followed a "familiar ritual of finger-pointing."

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