By Daryna Krasnolutska and Halia Pavliva

The EU is seeking bilateral agreements on gas shipments with former Soviet countries including Armenia, Azerbaijan, Moldova, Ukraine and Belarus to secure stable supplies, a commissioner said today.

“Gas should flow even as problem arises,” said Benita Ferrero-Waldner, European Commissioner for external relations in a presentation today in London. “We need partners whose governments’ honor contracts.”

A price dispute between Russia and Ukraine over gas supplies blocked transit shipments to the 27-member EU for two weeks in January. OAO Gazprom, Russia’s natural-gas exporter, resumed supplies to the European Union via Ukraine on Jan. 20, after they signed 10-year natural-gas contracts.

The EU agreements with former Soviet countries would depend on each country’s role in gas trade, Benita Ferrero-Waldner said. Armenia and Moldova depend on gas imports for most of their energy needs, while Ukraine is the major route for Russian gas on the way to Europe. The potential for EU partnerships would depend on countries’ progress toward democracy, she said.

The EU will host a conference in Brussels on March 23 to discuss Ukraine’s gas-transit industry and funding commitments from member states and international institutions that would go to improve the safety and quality of the pipelines. The deepening global economic crisis may complicate efforts to raise money for modernizing Ukraine’s natural-gas pipeline network.

“We are looking for investors to upgrade the Ukraine’s pipelines,” the commissioner said.

Turkish Alternative

The Russian-Ukrainian dispute also renewed calls for the region to reduce its reliance on Russia by building up new links such as the proposed Nabucco link via Turkey.

Russia, which supplies a quarter of Europe’s gas, cut off shipments to Ukraine on Jan. 7 after accusing it of siphoning off EU-bound gas, a charge the country denies. More than 20 European countries were affected, as 80 percent of Russian gas exports pass through Ukraine’s pipeline network.

European Commission President Jose Barroso said the cut-off should never have happened and that both Ukraine and Russia had damaged their credibility.

Ukraine should set up a joint venture with Russia’s OAO Gazprom and European companies including E.ON AG and GDF Suez SA to guarantee gas supplies after January’s dispute, Ukrainian billionaire Dmitry Firtash said on Feb. 2 in a Bloomberg Television interview. Firtash controls 45 percent of Swiss- registered gas trading company RosUkrEnergo AG.

URL: http://www.bloomberg.com/apps/news?pid=newsarchive&sid=aoON0rcc_3ZY