GAZPROM SAYS UKRAINE CUTOFF THREAT JUST A "WARNING

C O N F I D E N T I A L MOSCOW 000355 SIPDIS SIPDIS DEPT FOR EUR/RUS, FOR EEB/ESC/IEC GALLOGLY AND WRIGHT EUR/CARC, SCA (GALLAGHER, SUMAR) DOE FOR HARBERT, HEGBORG, EKIMOFF DOC FOR 4231/IEP/EUR/JBROUGHER E.O. 12958: DECL: 02/08/2018 TAGS: EPET ENRG ECON PREL RS SUBJECT: GAZPROM SAYS UKRAINE CUTOFF THREAT JUST A "WARNING SHOT" Classified By: Ambassador William J. Burns for reasons 1.4 (b) and (d) ¶1. (C) Gazprom's international affairs director Ivan Zolotov told us February 8th that press accounts of Gazprom's threat to cutoff gas to Ukraine on February 11th were correct. However, he added that his "personal opinion" was that this was just a "warning shot" to Ukraine in the run up to upcoming visits of Ukrainian President Viktor Yuschenko and, later, Prime Minister Yulia Tymoshenko. He said "Tymoshenko started it" when she publicly demanded higher transit fees and the elimination of intermediaries in the transport chain of gas from Turkmenistan to Ukraine. "When the other side makes a move, we react in kind." Zolotov said Ukraine knew the announcement was coming and that negotiations have been on-going. ¶2. (C) Zolotov repeatedly expressed his belief that gas flows would continue uninterrupted while negotiations continue, saying "we've resolved it before and we'll resolve it again." He added, however, that if "worse comes to worst," Gazprom estimates that 10-15% of supplies to Europe could be affected. He said that this level of reduction would be easily offset by withdrawals from storage in Europe, including from facilities in Ukraine. Zolotov justified Gazprom's threat, saying "we have to ring the alarm bells, because they owe us a lot of money." He said that of the reported $1.5 billion debt that is the cause of this latest dispute, $500 million is for gas supplied this year while the rest is still outstanding from last year. ¶3. (C) Oleg Gutsulyak, First Secretary at the Ukrainian Embassy in Moscow, questioned the $1.5 billion figure touted by Gazprom, but added that the embassy is not involved directly in the negotiations. He seemed confident, however, that there would be no supply disruptions. Former Deputy Energy Minister Vladimir Milov, now a consultant and outspoken Kremlin critic, was less sure that Gazprom would restrain itself. He told us February 8th that the Kremlin sees Tymoshenko as the enemy and politically vulnerable at home. "They want to bury her, and this is their chance." BURNS