Russia-Ukraine gas dispute prompts EU meeting

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Russia and Ukraine have sought support from Brussels in a bid to resolve a week-long dispute over gas supplies, which has seen six European countries start to experience gas shortages. EU national envoys will meet today in the Belgian capital under the auspices of the Czech EU Presidency to develop a common response.

Russia’s Gazprom halted gas supplies to Ukraine on 1 January after talks on renegotiating a new delivery contract for 2009 broke down amid fierce disputes over pricing.

Although supplies to EU countries should not be affected, several member states reported a reduction in Russian deliveries. Russia says Ukraine is stealing natural gas destined for Europe to make up for its own needs. Ukraine denies that it is stealing gas, saying there are technical reasons for Europe’s natural gas reductions. Kiev also asked for EU mediation, an option rejected by Moscow.

In the five days since the shutdown, Poland, which was hit worst by the dispute, has reported a drop of 11 percent in Russian gas supplied via Ukraine. But other countries like Hungary, Romania, Turkey, Bulgaria and the Czech Republic also felt the effects of reduced supply.

The EU was at first reluctant to intervene in the dispute, which it sees as a commercial row. But the Union’s ambassadors are meeting today (5 January) in Brussels to discuss the issue and coordinate a common response. The bloc could send an investigating team to the two countries within days, EU officials said on Saturday (3 January), quoted in Deutsche Presse.

According to analysts, the EU has sufficient storage to cover supplies for a few months. Utilities firms in Germany, which gets 37 percent of its supply from Russia, said deliveries were taking place as normal and customers were not experiencing any disruptions.

Alternative routes

The dispute has forced both Ukraine and Russia to reassure Europeans that their supply will not be affected. Russia’s state-owned gas exporter Gazprom said it would boost natural-gas deliveries to Europe today, using two other routes through Belarus and one to Turkey. PGNiG, the Polish oil and gas company, said it was relying on Russian gas delivered via Belarus to compensate for the Ukrainian shortfall. 

Since shipments to Ukraine were halted, supplies have already been boosted along the Yamal-Europe pipeline and the Beltransgaz system (both of which cross Belarus), as well as the Blue Stream link to Turkey. 

Gazprom CEO Alexei Miller blamed Ukraine for the crisis. "Our European consumers in Hungary, Slovakia, Romania and Poland, and in the Balkans, are reporting unlicensed siphoning-off of Russian gas on Ukrainian territory," said Miller. "In this situation, Gazprom must provide additional volumes of gas through other gas transporting corridors," he added. 

Ukrainian energy security official Bohdan Sokolovsky warned that Europe could face a bigger crisis within two weeks if Russia continued to halt natural gas deliveries to his country. "In around ten days, there could be very serious technical problems," he said. "The transport of gas may be disrupted at some point and it will not be our fault." 

Estonian Foreign Minister Urmas Paet, whose country has been involved in various disputes with Russia before, said the EU should seek alternatives to reduce its dependence on Russian gas giant Gazprom. But he acknowledged that there were few alternatives for the time being, and instead called on the EU to think about how to influence Russia and Ukraine. 

Alfa Bank's  chief strategist Ronald Smith said the EU was reluctant to get involved in the dispute between Moscow and Kiev. "I think the Europeans see involvement in negotiations as a no-win situation for themselves," Smith told Bloomberg yesterday. "They probably won't feel the need to get involved until gas volumes drop." 

The EU only produces a quarter of the gas it consumes. It imports a further quarter from Russia, 16% from Norway and 15% from Algeria, with the remainder sourced from Libya, Nigeria and Central Asia. 

From this perspective, the Union's dependence on Russian gas does not seem quite so dramatic: unless figures for individual countries are considered. While Spain does not import any Russian gas at all, Poland, Estonia, Latvia, Lithuania and Finland satisfy 100% of their gas needs from Russia. 

European solidarity requires such realities to be taken into account, as well as the situation of non-EU countries such as Ukraine, which is also highly dependent on Russian supplies both as a consumer and a transit country. 

A similar row to the present one between Moscow and Kiev caused an energy crisis in 2006 (see Links Dossier on 'Pipeline politics' for further information). The 2006 spat pushed the EU to call for commitments to be honoured "under all circumstances," as 80% of the Russian gas to the EU is transported via Ukraine. 

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