Russia gas disruption bites in Europe

Russia halted gas supplies via Ukraine to the Balkans, Turkey and south-eastern Europe today and flows to EU-member state Austria dropped by 90 per cent in a deepening price row between Moscow and Kiev.

Russia and Ukraine blamed each other for the crisis which has struck at a time of unusually low winter temperatures across Europe, which receives about one quarter of its gas from Moscow.

The dispute threatens to worsen ties with the West already fraught after Russia's war with Georgia last year.

Europe receives about one fifth of its gas from Russia via Ukraine, leaving European customers vulnerable when Moscow reduced volumes to Ukraine on New Year's Day after failing to reach agreement with Kiev over gas prices.

Austria is a distribution hub which directs Russian gas to Germany and central Europe. "At the moment only around 10 per cent of Russia gas is being delivered," Austrian oil and gas group OMV said in a statement.

Russia and Ukraine - which have clashed repeatedly over the ambition of Kiev's pro-Western leaders to join Nato - blamed each other for the disruption.

The head of Ukraine's state energy firm Naftogaz Oleh Dubyna said Russia had probably decided to stop all gas supplies to Europe via Ukraine. That could jeopardise supplies to countries including Germany, Europe's biggest economy.

Alexander Medvedev, deputy CEO of Russian gas export monopoly Gazprom told reporters in London that Kiev had shut down three or four export pipelines overnight. He said the company was a "hostage of irresponsible behaviour" by Kiev.

Gazprom says it usually exports about 300 mcm of gas per day to Europe via Ukraine during the winter while Ukraine consumes about 100 mcm. The latest news of pipeline shutdowns suggests exports via Ukraine running at below 100 mcm, which could mean shortages in Europe in a day or so.

The disruptions come at a bad time for Europe, which is experiencing a cold snap likely to drive up gas demand. Temperatures in Bulgaria fell below minus 15 degrees Celsius overnight.

The dispute was also cited as a factor behind a rise in gas prices traded in London today.

Bulgaria's government called a crisis meeting after Bulgarian officials said flows had been halted along a pipeline spur that also supplies Turkey, Macedonia and Greece.

Croatia said its flows were halted too.

Bulgaria is particularly vulnerable to the disruptions because, unlike Greece and Turkey, it has no access to alternative gas supply routes.

Bulgarian fertiliser producer Neochim halted production after its gas suppliers were stopped.

"As of 3.30am supplies ... to Bulgaria as well as the transit to Turkey, Greece and Macedonia have been suspended," Bulgaria's Economy Ministry said in a statement. "We are in a crisis situation."

A delegation from the Czech presidency of the European Union met Ukrainian officials in Kiev, while talks between Gazprom and the EU were planned for later today in Berlin.

"The situation (with gas supplies via Ukraine to central Europe) getting worse by the minute and we would like to talk about this new situation," Czech Industry Minister Martin Riman told reporters in Kiev.

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.

The conflict between Moscow and Kiev, now in its sixth day, escalated dramatically yesterday when Russian Prime Minister Vladimir Putin ordered Gazprom to cut deliveries of gas to Europe via Ukraine by about one sixth - the same amount Moscow accused Kiev of siphoning off.