Russia cuts EU gas

Putin: “Europe has nothing to fear” European Union leaders denounced Russian actions today as “completely unacceptable” after gas supplies via the Ukraine were reduced by 70 per cent, resulting in immediate shortfalls.

But there is little the EU can do, especiallyif oil prices remain high.  If the action continues, the gas Grid may fail to meet demand in many EU states, including the UK and Ireland.

About 80 per cent of EU imports of Russian gas are transited across Ukraine. And a cold snap across the continent has reduced stockpiles. Worries about the gas supplies, coupled with Israel’s military operation in Gaza, have pushed oil up to a three-week high close to $50 a barrel. Russia, whose main export is oil, stands to benefit for a recovery in prices, says Reuters.

In a meeting with Gazprom chief Alexei Miller, Russian prime minister Vladimir Putin asked what should be done to break the impasse. “There is a proposal to reduce gas supply at the Russia-Ukraine border by the volume that has been stolen – 65.3 million cubic metres, and in future to reduce it by however much is stolen each day,” Mr Miller said, according to a report in the Irish Times.

“Good, agreed, reduce it from today,” replied Mr Putin. “And inform our European partners and the European Commission about the situation.”

The EU sent a fact-finding mission to Kiev yesterday to meet Ukrainian officials, and the European delegation is due to meet executives of Gazprom today, probably in Berlin.

The delegation, led by Czech industry minister Martin Riman and including commission officials, is expected to stress the need for Gazprom to honour its contracts with EU energy companies.

EU member states Austria and Romania said deliveries were down 90 percent and 75 percent respectively. German utility E.ON Ruhrgas said it expected supplies to Germany from Ukraine, via the Czech Waidhaus border point, to stop entirely today (Tuesday).
Kremlin-controlled firm Gazprom stopped pumping gas to Ukraine for domestic consumption on New Year’s Day, after accusing the country of failing to pay its fuel bills for 2008.

Gazprom continued sending gas through Ukrainian pipelines to EU countries, but claimed Kiev was illegally siphoning off that fuel as it crossed its territory.

Much of eastern Europe and the Balkans has suffered a drop in Russian gas flow in recent days and, though most have large amounts in storage, they fear customers may suffer shortages if the crisis and current spell of cold weather continue. Poland, Hungary, the Czech Republic, Romania, Bulgaria, Turkey, Greece and most of former Yugoslavia have so far reported falls in gas supply.

Mr Miller said Gazprom would compensate for the cut in gas flow through Ukraine by boosting exports to the EU through pipelines that cross Belarus and Turkey. He also claimed that Ukraine currently owed Gazprom more than $600 million (€442 million), but warned that “it will soon be billions if they keep illegally taking gas”.

Analysts said Russia’s move to cut EU supplies crossing Ukraine could prompt Brussels to apply more pressure to Kiev to resolve the deepening crisis.

Ukraine denies owing money to Gazprom and insists any Russian gas it is now using is only serving to maintain pressure in the pipeline network. Kiev accused a Gazprom subsidiary in neighbouring Moldova yesterday of siphoning off gas that was supposed to supply Balkan countries.

Moscow and Kiev have both urged the EU to mediate in the dispute, but it is loath to intervene in a squabble between Russia – its main energy supplier, but a prickly political partner – and Ukraine, where it backs pro-western leaders intent on ending the Kremlin’s longstanding domination of their country.

“It is a bilateral issue between Ukraine and Russia and we are not going to come in to evaluate who is responsible for what,” said European Commission spokesman Ferran Tarradellas.

He said there was no immediate threat to EU consumers’ gas supply, but he appealed to both parties to resolve the dispute.

“Since we are the main market for Russian gas . . . we have an obvious interest in applying pressure on these parties to reach as soon as possible an agreement which is definitive.”

At an extraordinary meeting yesterday in Brussels, EU ambassadors agreed to continue monitoring any disruptions to gas supply and noted that Romania and Bulgaria had experienced temporary falls of 20 and 30 per cent due to the dispute.

“In my opinion there must be an agreement between Moscow and Kiev this week,” said Deputy Prime Minister Alexandr Vondra of the Czech Republic, which holds the European Union’s rotating presidency.