January 7, 2009 / 1:36 AM / 11 years ago

Russian gas flow to Europe halted through Ukraine

MOSCOW/KIEV (Reuters) - Russian gas flows to Europe through Ukraine shut down completely on Wednesday, reducing power to industries and homes in south-east Europe and disrupting supplies to major economies.

A technician stands beside a gas pipe at the WINGAS gas storage facility near the northern German town of Rehden January 7, 2009. REUTERS/Christian Charisius

The shutdown, triggered by a price dispute between Moscow and Kiev, hit gas supplies as far West as France and Germany as Europe faced freezing mid-winter temperatures.

“Russia, which supplies 80 percent of its gas to Europe through Ukraine, has left Europe without gas. There is zero transit,” said Valentin Zemlyansky, a spokesman for Ukrainian state energy firm Naftogaz.

Russian gas export monopoly Gazprom blamed Ukraine for the closure, and said it was raising supplies to the European Union and Turkey via alternative routes.

Despite those measures, the Ukraine shutdown cut Russia’s supplies to Europe — which depends on Russia for a quarter of its gas supplies — by half.

Austria, the Czech Republic, Slovakia, Poland and Romania said their supplies were halted, joining a growing list of countries which have seen the flow of gas via Ukraine cut off. Some said they were getting Russian gas through other routes.

Several countries have taken emergency measures to eke out dwindling fuel reserves by switching to other energy sources.

The International Energy Agency said Bulgaria, Romania, Greece and Turkey would have difficulty providing electricity and heating if the cold weather and gas disruptions continued next week.

The reduction in supplies started on January 1 when Russia reduced gas volumes to Ukraine in a dispute over debts and gas prices, and has been sharper and more prolonged than a similar shutdown in January 2006.

EU WARNING

The European Union presidency, which had earlier said it would prefer not to intervene in a dispute between two energy companies, said on Wednesday it would take a more forceful approach unless the gas was flowing again by Thursday.

“If supplies are not resumed by tomorrow, we will have to see stronger intervention from both the EU presidency and the EU as such,” said Czech Prime Minister Mirek Topolanek, whose country holds the EU presidency.

The EU has a limited ability to act and it has failed to reduce its use of Russian energy because of internal divisions and the lack of alternatives. Some member states have bilateral energy deals with Russia, undermining hopes of a united front.

Ukraine’s Naftogaz chief Oleh Dubyna said he would go to Moscow on Thursday for talks with Gazprom CEO Alexei Miller, but both sides traded blame and there was no sign Moscow and Kiev were closer to resolving the row over pricing and transit fees.

“I consider it necessary... to immediately resume the uninterrupted transit of Russian gas to European consumers in the volumes that were being transported before December 31,” Ukraine’s pro-Western President Viktor Yushchenko wrote in a letter to Russian President Dmitry Medvedev late on Tuesday.

In a separate letter to European Commission chief Jose Manuel Barroso, Yushchenko asked the EU to use all efforts to start talks to end the crisis, which has further dented investor confidence in his country.

The cost of protecting Ukrainian debt against restructuring or default rose to 54.75 percent on an upfront basis, meaning an investor buying protection for $10 million (£6 million) of Ukrainian debt must pay $5.475 million plus $500,000 a year for five years.

CENTRAL, EASTERN EUROPE BEAR THE BRUNT

So far eastern and central Europe have borne the brunt of the row, with Bulgaria cutting or suspending supplies to industrial users. Two fertiliser companies halted production.

Thousands of Bulgarian households spent a freezing night without central heating because utilities need time to switch to alternative fuels, municipal officials said. Schools were shut and some companies were closed on Wednesday.

The Hungarian unit of Japanese car maker Suzuki, one of Hungary’s biggest exporters, halted production after Hungary imposed restrictions on industrial users of gas, a Suzuki spokeswoman said.

The euro zone’s major economies have escaped significant economic repercussions, but France has reported a drop in supplies and an Italian industry ministry spokesman said Italy has begun tapping its stockpiles of natural gas.

Slideshow (16 Images)

German energy provider E.ON Ruhrgas reported a drastic decline in incoming Russian gas deliveries, although no industry or households would be short of gas. But it has warned that prolonged cuts combined with a cold spell could cause shortages.

High energy users like aluminium, glass and metals makers could be hurt by a lengthy crisis.

Additional reporting by Christian Lowe; Writing by Dominic Evans; Editing by Giles Elgood

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