Russian-Ukraine gas dispute hits EU countries with major cuts in deliveries

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The Independent Online

Gas supplies fell sharply Monday to some European countries in the fallout of Moscow's pricing dispute with Ukraine. Officials in some nations urged energy-hungry industries to switch to oil while consumer groups elsewhere braced for price hikes.

Hungary, Poland and Austria all reported that gas piped to them from Russia through Ukraine had slowed down by between 14 and 40 percent.

Gas prices rose marginally on Monday, although there was little to indicate the dispute between Russia and Ukraine was affecting prices.

With the 25-nation European Union counting on Russia for a quarter of its natural gas needs — mostly through Ukraine — concern rose that a prolonged standoff could spell severe problems.

The German government urged Russia and Ukraine to compromise quickly in order to resolve their dispute over natural gas deliveries.

Russia took over the rotating presidency of the Group of Eight most wealthy nations on Sunday, with President Vladimir Putin looking to convert his country's energy wealth into political influence.

East European countries with a record of decades of energy dependency on Moscow established during a half century of domination by the former Soviet Union are the most vulnerable to supply disruption.

Hungary reported gas supplies down by 40 percent on Monday, after Russia's OAO Gazprom cut deliveries to neighboring Ukraine, which acts as a transit country for most of Russia's gas consignment to Europe. Russian gas amounts to about 80 percent of Hungary's needs.

MOL, the country's national wholesaler, said households would not be immediately threatened but urged major industrial consumers to switch to backup oil systems. And MOL official Sandor Kantor said his company would be forced to cut deliveries southward to Serbia and Bosnia-Herzegovina in efforts to ensure domestic supply.

Economic and Transport Minister Janos Koka said the situation was under control — for now — but warned of unspecified "government initiatives" if temperatures drop substantially below the freezing point.

In Poland, which depends on Russia for more than 60 percent of its natural gas needs, the national supplier PGNiG reported a 14-percent loss in pressure in the gas pipeline coming in over Ukraine.

Apparently referring to fears of a complete collapse in deliveries from Russia, Economy Minister Pitor Wozniak said the country had stocks of "seven or eight days," whereas PGNiG officials said supplies were enough for two weeks.

In Austria, the OMV energy conglomerate said that natural gas imports from Russia via Ukraine were down by a third over usual levels. Slovak state oil company official Alexander Nemudrov told Russia's Gazprom-owned NTV television on Monday that it was receiving just 60 percent of the gas it needs to export further West.

Germany's E.On Ruhrgas natural gas distributor said deliveries to big businesses could be crimped by the dispute.

German industry can draw on stocks holding up to 75 days worth of gas as well as imports from other countries such as Norway and the Netherlands, economy ministry spokeswoman Sabine Maass said.

Italy and other nations with diversified gas sources were less affected.

But "in the long term we cannot afford to give up" Russian natural gas, Paolo Scaroni, the chief executive of Italy' ENI energy concern. He said Italy, which gets a fifth of its needs from Russia, could compensate for two weeks from reserves should all imports from there be stopped.

Officials in Britain, which has started to rely on natural gas imports as its North Sea production has diminished, played down the immediate effects of the dispute to the East. But Allan Asher, head of the energy watchdog Energywatch, said British providers could raise prices because of the problem.

Norway's Statoil ASA — a major North Sea producer — cautioned other European countries that it was not able to provide relief.

"We already are producing as much as we can, so there's not much we can do to meet a shortfall," said spokesman Ola Morten Aanestad.

The gas dispute was the focus of a planned meeting of European energy officials set for Wednesday in Brussels. In announcing the meeting Friday, EU Energy Commisioner Andris Pielbalgs said the EU's Gas Coordination Group would deal "with all eventualities."



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