January 9, 2009 / 2:34 PM / 10 years ago

Gas row exposes east Europe's Achilles heel

SOFIA (Reuters) - Energy security has long been a weak spot in eastern Europe but the cut in Russian gas supplies this week shows just how vulnerable the region is and the urgent need to tackle long-neglected problems.

Hundreds of thousands in the Balkans were left without gas heating in the middle of the winter and dozens of factories across eastern and central Europe were forced to halt production.

Blackouts and power rationing could come next if freezing weather and the price row between Moscow and Kiev that choked off gas supplies, continues next week, industry officials warn.

The disruption, which Bulgaria and Croatia called a crisis, is exacerbated by a lack of pipeline links between countries in the region, outdated Soviet-era grid infrastructure, transmission losses and wasteful energy use.

“This is a big lesson for us all to realise how dependent we are and to find ways to reduce this dependence,” said EU Consumer Affairs Commissioner Meglena Kuneva, whose native Bulgaria was among the worst hit.

“We have seen paradoxes — gas from one part of Slovakia could not be brought to another one simply because there is no pipeline connection,” she said.

Former communist eastern Europe has so far done little to reduce its huge reliance on its former Soviet master, Russia, and on single supply routes, analysts said.

Some, like Serbia and Bosnia, not only depend fully on Russian gas, but have no storage reserves either.

Bulgaria’s leading business group accused the government of “amnesia” for forgetting the lessons of a similar gas row in 2006, which also impacted flows to Europe. The current row cut off all supplies via Ukraine to the continent on Wednesday.

INTERNAL LINKS

Eastern Europe’s best bet to raise energy security in the short-term is to build internal pipeline links and connect its gas network with that of western Europe, analysts said.

“Investment in regional infrastructure and greater interconnection of both gas and power markets would...allow the region to cope better with supply shocks,” said IEA’s Tim Gould, an expert on the Caspian, Caucasus and southeast Europe.

The gas crisis should speed up work on an initiative of eight central and southeast European countries to link their gas pipeline networks, first announced last year and still on the drawing table.

The project, which includes Hungary, Austria, Slovenia, Croatia, Bosnia, Serbia, Romania and Bulgaria would allow them to import gas from Azerbaijan and the North Sea, officials say.

Earlier this week, Sofia sought financial aid from Brussels to build a delayed 80 km link to an existing Turkey-Greece pipeline and start importing Azeri gas. It also needs to build a 15 km stretch to Romania.

Analysts say internal gas links are a faster and cheaper way to diversify supplies as bigger projects, such as the Nabucco pipeline, would be delayed by the global economic slowdown or may not move beyond the drawing board.

“Larger volumes will not be available until the early 2020s,” said Jonathan Stern of the Oxford Institute for Energy Studies. “All new infrastructure development will be slowed by the economic recession.”

The EU has made the Nabucco, due to bring Caspian and Middle Eastern gas via Turkey and the Balkans to Austria, a priority in its policy to reduce dependence on Moscow. But the long-delayed project has so far failed to secure enough supplies.

POWER RATIONING

Raising the use of alternative fuels, such as renewables, and addressing widespread inefficiency of energy use are also key in making eastern Europe less vulnerable, analysts say.

“The energy efficiency is three to four times lower than in Western countries,” said Aleksandar Kovacevic, a Serbia-based independent energy analyst.

Gas accounts for less than 10-15 percent of annual energy consumption in the western Balkans and Bulgaria but some utilities, which heat homes and offices in winter, are not designed to use alternative fuels.

Investment in modernising power grids is crucial too.

Many affected families in the Balkans turned to electric heaters this week, causing a run on stores and worries about the power grid’s capacity.

The situation is particularly dramatic in the western Balkans, which already suffer chronic power shortages.

Some utilities warned that power rationing, not seen since the Communist era when it was a way of life, may return if gas supplies do not resume quickly.

“The situation is stable for now. Unfortunately, there could be some restriction to customers in the emergency situation that already affects Europe,” Stefan Szyszkowitz, chief executive of EVN Bulgaria said.

Additional reporting by Tsvetelia Ilieva in Sofia and Ivana Sekularac in Belgrade; editing by James Jukwey

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