MOSCOW (Reuters) – Russia sharply cut gas flows to Europe via Ukraine on Tuesday in a dramatic worsening of a pricing dispute with Kiev that threatened to disrupt supplies as far west as Italy and Germany.
Russian export monopoly Gazprom said it supplied some 65 million cubic meters (mcm) to Europe on Tuesday through ex-Soviet neighbor Ukraine, a fall of 78 percent from the 300 mcm it had been shipping since the dispute erupted on January 1.
The European Union, dependent on Russia for a quarter of its gas, urged Moscow and Kiev to find a solution this week and German Economy Minister Michael Glos said it was very important the two sides began negotiations.
The head of Ukraine's state energy firm said he would fly to Moscow on Thursday. Gazprom said it was ready to talk any time but did not expect Ukraine to return to the talks table for now.
Hungary became the latest victim of the crisis, saying it would tell Serbia and Bosnia it was unable to provide transit gas shipments. It would ask some power plants to switch to other fuels and consider tapping its strategic reserves.
Earlier Bulgaria, Turkey, Macedonia, Greece and Croatia also said Russian gas flows via Ukraine had halted, creating what Bulgaria called a "crisis situation" in the middle of winter.
EU members Austria and Romania said deliveries were down 90 percent and 75 percent respectively, and German energy firms warned there could be gas shortages in Europe's biggest economy if the dispute dragged on and sub-zero temperatures persisted.
"Even our possibilities will reach their limits if these drastic cuts in shipments last and if temperatures continue to stay at very low levels," E.ON Ruhrgas Chief Executive Bernhard Reutersberg said.
BLAME GAME
Gazprom can only guarantee gas supplies to Italy of 7 million cubic meters on Tuesday, or less than 20 percent of the expected amount, an Italian source close to the matter said. The industry ministry earlier said Rome planned to increase gas imports from alternative suppliers.
Russia and Ukraine blame each other for the crisis, which has struck at the height of the European winter and spread alarm across the continent.
The baseload day-ahead price for gas traded in London was up 18.5 percent at its highest since late October, driven by cold weather and anticipation that a protracted dispute could have a knock-on effect on British supplies.
Gazprom spokesman Sergei Kupriyanov declined to elaborate on the reasons for the sharp fall in supply to Europe on Tuesday.
"There was a request for 130 mcm. We have supplied those volumes minus 65.3 mcm," he told reporters. The figure of 65.3 mcm refers to the amount of gas that Moscow accuses Ukrainian of stealing since January 1 by siphoning off gas meant for Europe.
Gazprom had previously accused Ukraine of shutting down three Russian export pipelines early on Tuesday and said it was a hostage of Kiev's "irresponsible behavior." It said it would try to use alternative delivery routes to avoid a crisis.
But Ukraine blamed Russia, with President Viktor Yushchenko saying Moscow would continue cutting gas supplies to Europe or stop them altogether. State energy company Naftogaz said Russian supply was down to 58 mcm, below the Gazprom figure.
Ukraine's government ordered regional utilities to start using fuel oil instead of gas. Neighboring Slovakia will declare a state of emergency, Czech news agency CTK reported. Poland cut gas supplies to industrial clients, while Serbia and Bosnia said Russian supplies had completely stopped.
The Czech Republic, which holds the EU's rotating presidency, said it was considering the "extreme option" of a three-way EU-Russia-Ukraine summit.
"However this is not on the table yet because we insist the two sides must reach an agreement," Prime Minister Mirek Topolanek said.
The dispute threatens to worsen Russia's ties with the West, already fraught after its war with Georgia last year.
JAN. 1 CUT
Europe's heavy dependence on Russian energy -- and vulnerability to supply disruption -- was highlighted when Moscow reduced volumes to Ukraine on New Year's Day after failing to reach agreement with Kiev over gas prices.
But most larger EU countries say they have large amounts of gas stockpiled after several mild winters and have access to supplies from sources such as Norway and Algeria.
"If there are significant drops in supplies to the European Union, the key question is whether it goes on for a very long time. But it would have to go on for weeks or months for serious problems to arise for Western European customers," said Simon Blakey, director of European research at Cambridge Energy Research Associates.
Russia and Ukraine have clashed repeatedly on a range of other issues, particularly the ambition of Ukraine's pro-Western leaders to join NATO.
The disruption comes at a bad time for Europe, which is experiencing a cold snap likely to drive up gas demand.
"We are in a crisis situation," Bulgaria's Economy Ministry said in a statement. State firm Bulgargaz told industrial users it was suspending or cutting supplies to a minimum and urged them to switch to alternative fuels like oil. Two fertilizer companies had to halt production.
The government said people would not be left in the cold, but urged households to start using other means of heating. Temperatures on Monday night fell below minus 15 Celsius (5 Fahrenheit).
Worries about European gas supplies, coupled with Israel's military operation in Gaza, have pushed oil prices up to a three-week high close to $50 a barrel. Russia, whose main export is oil, stands to benefit from a recovery in prices.
http://news.yahoo.com/s/nm/20090106/ts_nm/us_russia_ukraine_gas
Topic: Russian gas disruption spreads across Europe (Read 658 times)