4 Jan 2009

Russia gas row disruption spreads

7:23 am on 4 January 2009

Russian gas flows to four European Union countries dipped below normal on Saturday after Moscow cut off supplies to Ukraine in a pricing row, and there were no talks in sight to resolve the dispute.

Temperatures were under zero overnight in Europe, and Bulgaria's Bulgargaz joined energy firms in Poland, Romania and Hungary in saying they had noted falls in supply, though flows to Europe's biggest economy, Germany, were not affected.

The European Union, which gets a fifth of its gas from pipelines that cross Ukraine, said it would call a crisis meeting of envoys in Brussels on Monday and demanded that transit and supply contracts be honoured.

It also urged both sides to reach an agreement soon, but added that it did not intend to become a mediator and that the bloc had sufficient gas reserves for now.

Europe has enough gas stockpiled to manage without Russian supplies for several days but could face difficulties if any disruption stretched into weeks, analysts said.

The prospects of a swift settlement to the row appeared remote as Russian gas monopoly Gazprom said President Dmitry Medvedev had approved its move to take Ukraine to the arbitration court in Stockholm over gas transit to Europe.

Russia alleged Ukraine was stealing gas intended for Europe and playing political games. Ukraine accused Russia of using "energy blackmail" and of not providing enough gas for the proper functioning of the transit system.

Three years after a similar dispute briefly disrupted supplies, European fears of gas flows dropping off in the dead of winter were once again becoming a reality - and Russia's reputation as a reliable gas supplier was under new scrutiny.

Russia halted all supplies to Ukraine on New Year's Day in what it called a purely commercial dispute.

But in the background is a fierce disagreement over a drive by Kiev's pro-Western leaders to join NATO and Ukraine's strong support of Tbilisi during Russia's war with Georgia last year.

Poland, which had earlier reported a drop in Russian supplies, said deliveries via Ukraine were now down 11%. Hungary said pressure in its pipeline from Ukraine had recovered slightly but was still below normal levels.

Gazprom said it was increasing deliveries to Europe by 52 million cubic metres per day, about 16%, but said its ability to compensate for the fuel lost on the Ukrainian route was limited.

The extra deliveries were being pumped around Ukraine - through Belarus and Turkey - and from underground storage facilities in Europe.

Talks between Naftogaz and Gazprom have not resumed since they collapsed on Wednesday.