Russia cuts oil supplies to Ukraine

UKRAINE faced a deepening energy crisis yesterday after Viktor Chernomyrdin, Russia's Prime Minister, said that Moscow would drastically reduce oil supplies to its neighbour. He told petrochemical workers in the Siberian city of Tomsk that Russia would deliver 15 million tons of oil this year, only one-third of the amount that the Ukrainians say they need.

The announcement was a blow to Ukraine, where fuel shortages have disrupted airline and other transport services for several months. Farmers lacking petrol have found it difficult to deliver food to cities, and police and emergency medical services have also suffered.

Ukrainian leaders have warned the country's 52 million people that the economy could collapse this year without measures to tackle the energy crisis and other problems, including a state budget deficit running at 17 per cent of gross national product. 'This year Ukraine will eat up what has been left after seven years of perestroika. After this, the crash will come,' Leonid Kuchma, the Prime Minister, told his cabinet ministers on 8 February.

Oil is only one of several economic problems straining Russian-Ukrainian relations. The two countries are also arguing over the price of Russian gas sold to Ukraine and how to repay the Soviet foreign debt.

Other disputes that have flared since the Soviet Union's collapse in 1991 include the fate of nuclear weapons on Ukrainian soil, the sharing out of the Black Sea Fleet and other military assets, and ownership of the Crimea. Ukraine is deeply suspicious of Russia's proposals for closer integration of the Commonwealth of Independent States, fearing this may represent an effort to resurrect the centralised, Russian-dominated Soviet state in another guise.

President Leonid Kravchuk has scorned as 'economic romanticism' the argument that Ukraine can prosper without cultivating close commercial and industrial relations with Russia. At the same time, he has tried to reduce Ukraine's dependence on Russian energy by increasing oil and gas imports from Iran. He visited Tehran last year and signed a protocol under which Ukrainian teams are exploring for oil and gas in Iran and receiving payment in kind. In addition, Ukraine, Iran and Azerbaijan have agreed to build a pipeline linking the three countries.

The Kiev government said this month it intended to develop oilfields, invest in refineries and build oil terminals at ports. At present, the port of Odessa has a capacity of less than 10 million tons, leaving Ukraine dependent on oil delivered through Russia.

Mr Chernomyrdin, an energy specialist, defended his decision to reduce supplies to Ukraine by observing that Russian oil production is continuing to fall. Output is expected to drop this year from 347 million to 340 million tons, down from a peak of 569 million tons in 1988.

Oil and gas exports are Russia's main source of hard currency, but the oil industry has been crippled by lack of equipment, pipeline breakdowns and inefficient extraction techniques. Some Russian experts believe their country may even turn into an oil-importer in the mid-1990s.