Gas shortages spread as Russian-Ukraine row flares

6th January 2009, Comments 0 comments

With 17 European countries reporting sharp falls or a complete halt in Russian gas shipments, EU officials called the situation "completely unacceptable" and demanded the flow be restored.

Brussels -- Gas shortages spread across Europe reaching France and Italy on Tuesday as cuts in Russian supplies through Ukrainian pipelines escalated an increasingly bitter crisis in the depths of winter.

With 17 European countries reporting sharp falls or a complete halt in Russian gas shipments, the European Union said "the situation is completely unacceptable" and demanded the flow be restored.

In the first sign of compromise, however, gas officials in Moscow and Kiev signalled that they were ready for further talks to resolve the problems. But both sides continued to trade blame publicly for the disruption.

"The Czech EU Presidency and the European Commission demand that gas supplies be restored immediately to the EU and that the two parties resume negotiations at once," they said in a statement.

One after another, European countries announced cuts in their supplies of Russian gas, with Balkan countries the hardest hit but EU heavyweights France, Germany and Italy also suffering reductions.

Russia is the world's largest natural gas producer and provides around one-quarter of the gas used in the European Union, or about 40 percent of the gas the bloc imports.

Russia cut gas supplies to Ukraine on January 1 over a payment dispute. It then accused Ukraine of "stealing" Russian gas meant for customers in Europe.

On Monday, Russian Prime Minister Vladimir Putin ordered an immediate reduction of gas shipped to Europe via Ukraine to compensate for volumes Gazprom said had been illegally siphoned off by Kiev.

Leaders in both Russia and Ukraine had pledged in recent weeks that supplies to Europe would not be disrupted by their dispute and they are now scrambling to paint each other as an unreliable energy partner for the EU.

A growing number of countries reported sudden and sharp supply shortfalls, with nations in southern and eastern Europe who depend most heavily on Russia the hardest hit.

Bulgaria has resorted to rationing supplies to industry, Slovakia declared an energy emergency and most Balkan countries said deliveries of Russian gas had been totally halted.

Austria, Bosnia, Bulgaria, Croatia, the Czech Republic, Germany, Greece, France, Hungary, Italy, Macedonia, Poland, Romania, Serbia, Slovakia, Slovenia and Turkey all reported deep cuts in their gas supplies.

The disruption coincides with a particularly cold snap -- temperatures dropped to minus 25 degrees Celsius (minus 13 Fahrenheit) in Serbia -- and many countries in Eastern and central Europe depend on gas for central heating.

Experts said the immediate impact on consumers in Europe would be mitigated by the fact that they had consciously stocked up on reserves after a similar Russia-Ukraine dispute caused shortfalls in 2006.

"We are still a long way from end-user customers having a problem," said Chris Weafer, chief strategist for Moscow-based investment bank UralSib.

In Kiev, the chief executive of Ukraine's state gas firm Naftogaz, Oleg Dubina, said that he would travel to Moscow on Thursday for talks with Russia's energy giant Gazprom, which also said it was ready to negotiate.

Gazprom chief Alexei Miller also said that Russia would hold talks in Brussels Thursday with the European Union and the EU Commmission on the gas crisis.

The EU presidency, represented by the Czech Republic, said it considered all sides were ready to return to the negotiating table.

"The Russian side is ready to take this step," said Czech Industry Minister Martin Riman after a meeting with Gazprom's vice-president Alexander Medvedev in Berlin. "We are also. And I consider, after the talks in Kiev, that the Ukrainian side is also ready."

Earlier, Medvedev charged Ukraine with shutting down three of four pipelines that export Russian gas to Europe while Naftogaz accused Gazprom of cutting the volumes of gas it pumps into the system.

Despite the apparently renewed willingness in Moscow and Kiev to negotiate, Ukrainian President Viktor Yushchenko warned the EU that Russia might entirely cut off Russian natural gas supplies to Europe through Ukraine.

"In the opinion of Viktor Yushchenko, the Russian side intends to either significantly reduce or stop altogether the transit of Russian natural gas" to Europe through Ukraine, he said in a message to EU leaders.

Countries hit by Russian gas cuts

Russian energy giant Gazprom cut gas supplies to Ukraine on January 1 and has further reduced deliveries of Europe-bound gas through Ukraine in response to what it says is illegal siphoning off by Kiev.

The European Union depends on Russia for about a quarter of its total gas supplies, some 80 percent of which are pumped via Ukraine.

The shortfalls have hit particularly hard the countries of central and Eastern Europe, which are even more dependent on Russian supplies.

Here is a list of the 17 countries that have seen cuts in gas supplies:

- AUSTRIA: Russian gas supplies fall by 90 percent. Austrian energy company OMV says it can make up the shortfall by using extensive reserves.

- BOSNIA: Russian gas supplies entirely halted.

- BULGARIA: Russian gas supplies entirely halted. State gas company Bulgargaz says it is using reserves but will have to impose gas rationing for industry and has appealed to consumers to use "all possible alternative fuels."

- CROATIA: Russian gas supplies entirely halted. Croatian oil and gas group INA calls on all consumers to use gas sparingly, while the economy ministry says reductions will start for major industrial consumers.

- CZECH REPUBLIC: Russian gas supplies expected to fall by 75 percent.

- FRANCE: Russian gas supplies fall 70 percent. Energy group GDF Suez assures its supplies in France and to Europe will continue as normal.

- GERMANY: German gas importers Wingas and E.ON Ruhrgas report a fall in Russian gas supplies without giving a precise figure. The companies say they have enough gas in reserves to make up for the shortfall.

- GREECE: Russian gas supplies entirely halted. The Public Gas Corporation says there will be no effect on households due to high reserves but warns the state electricity company will be asked to cut consumption if needed.

- HUNGARY: Russian gas supplies entirely halted. The authorities say the situation is critical and factories have been requested to switch to other energy sources. Gas company FGSZ says reserves are sufficient for "some weeks."

- ITALY: Russian gas supplies drop 90 percent. The authorities say deliveries from other countries such as Algeria, Britain, Libya and the Netherlands will be increased and existing stocks can last "several weeks."

- MACEDONIA: Russian gas supplies entirely halted.

- POLAND: Polish national gas company PGNiG reports a drop of 85 percent drop in Russian gas supplies via Ukraine. The company says it will increase supplies through a pipeline that crosses Belarus to make up the shortfall.

- ROMANIA: Russian gas supplies reduced by more than two-thirds. The economy ministry calls an emergency meeting but says that consumption is being met by locally produced gas, as well as from reserves.

- SERBIA: Russian natural gas supplies fall by 50 percent. Serbian national gas company Serbijagas director Dusan Bajatovic warns the Russia-Ukraine dispute "has created an exceptional situation which could get worse."

- SLOVAKIA: Russian gas supplies fall by 70 percent. Slovak gas importer SPP declares a state of energy emergency in the country, which allows the company to cut supplies as required by the situation.

- SLOVENIA: Russian gas supplies fall by 90 percent. Slovenian natural gas supplies Geoplin says it is being forced to use reserves to meet domestic demand.

- TURKEY: Russian gas supplies transiting through the Balkans are entirely halted. Turkey increases gas imports through Blue Stream, a gas pipeline running under the Black Sea through which it receives most of its gas.


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