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Russia-Ukraine gas standoff

With 80 percent of Russian gas exports flowing through Ukraine, wintry Europe could be hard hit.

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Russian natural gas supplies to Europe, used to heat homes and businesses, fell sharply Monday as a pricing dispute between Russia and Ukraine turned nasty.

Monday, the Russian energy giant Gazprom cut off Ukraine's share of the gas flowing through the Friendship Pipeline. The pipeline carries about 80 percent of Russian gas exports through Ukraine to the West.

Russia says Ukraine is now "stealing" its share from Europe. Ukrainian officials deny it, but Serbia lost half of its gas supplies, forcing rationing and some industries to switch to oil. Hungary, Croatia, and Slovakia also reported a 30 percent drop in supplies Monday. By late Monday, Russia appeared to back down, vowing to restore full gas supplies to Europe by Tuesday night.

The Russian-Ukraine gas-price quarrel is stirring political passions on both sides and threatens to escalate into a much wider confrontation, experts warn. The gas conflict has its roots in Ukraine asserting its independence from Russia a year ago.

Moscow says Kiev should follow the logic of the "Orange Revolution," in which Ukrainians broke free from Russian influence, and accept that the days of Soviet-era energy subsidies must end. Ukraine, while agreeing in principle to higher gas rates, argues that the nearly five-fold price hike demanded by Moscow is unfair, abrupt, and politically motivated.

"Everybody understands that this is not about market pricing, it's pure politics," Oleksander Shushko, an analyst with the independent Institute of Euro-Atlantic Integration in Kiev. He says that the crisis may do great harm to Ukraine's energy-intensive economy in the short-run, but will show Ukrainians the need to wean the country's economy from dependence on Russia. "Unless we resolve this on our terms," he says, "it's clear that Russia will be able to play this card against us anytime it wants to."

The crisis erupted on the same day Russia assumed chairmanship of the Group of Eight (G-8) market-driven democracies, a high-profile position which Moscow has pledged to use to promote global "energy security."

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