Europeans Shiver From Russia-Ukraine Dispute

MOSCOW, Russia -- Moscow's decision to cut back on natural gas deliveries to Ukraine has left some Eastern Europeans without heat in sub-freezing temperatures and renewed Europe's fears about relying on Russia's state-controlled monopoly, OAO Gazprom, to supply a growing share of its energy needs.


As a cold snap gripped much of the continent, six Eastern European countries had to cut back natural gas use for power and heating, and two cities in Bulgaria were left with no gas as residents coped with frigid temperatures.

Russia cut back gas deliveries to Ukraine on Jan. 1 in a disagreement over prices and overdue payments, but promised to keep fuel flowing to European customers.

The Kremlin is now accusing its former Soviet-era partner of stealing gas meant for other customers, and reduced its shipments even further Tuesday.

Kiev claimed the lower Russian shipments have reduced pressure in the pipeline and, therefore, volumes.

The dispute is tarnishing the reputation of both countries as reliable partners in the natural gas delivery chain, analysts said Tuesday. And it will lead European customers to look elsewhere to meet their energy needs, with options ranging from different pipeline routes for Russian gas to alternative gas suppliers to different fuel sources altogether.

“If this goes on for more than a few days, it will lead people to shift away from Russia and Ukraine, and to look for a long-term shift in overall energy policy,” said Andrew Neff, senior energy analyst with IHS Global Insight.

He added, however, that Europe has few major alternatives to increasing gas imports from Russia's Gazprom, which is the world's largest natural gas producer and supplies a quarter of Europe's consumption of the relatively clean-burning fuel.

The European Union energy commission met with its natural gas industry Tuesday, and issued a joint statement condemning both sides in the dispute and urging the immediate resumption of full deliveries.

The head of the Ukrainian gas company Naftogaz, Oleh Dubina, spoke Tuesday to Gazprom chief executive officer Alexei Miller, and said he will travel to Moscow Thursday for new talks.

Russian Prime Minister Vladimir Putin's intervention in the dispute has raised fears once again that Moscow is using energy as a political weapon, though analysts said Ukraine has heightened the crisis by holding back supplies meant for other customers.

The current battle marks the second time in four years that Gazprom has become embroiled in contract battles with Naftogaz, which handles 80 per cent of Russian gas exports to Europe.

In a holdover from the Soviet days, Ukraine receives highly subsidized gas from Russia, which is now seeking to impose sharp price increases.

Gazprom is now planning two major pipelines – one under the Baltic Sea and one under the Black Sea – that would bypass Ukraine. At the same time, the European Union supports the Nabucco pipeline proposal, which would carry central Asian natural gas from Turkey to Austria, though many analysts question whether that project is feasible.

Mr. Putin has criticized calls within Europe for policies to shift demand away from Gazprom in the name of “energy security.” Mr. Putin is a staunch supporter of the new international supplier group, Gas Exporting Countries Forum, which has been formed to co-ordinate policies of major gas producers.

Still, European gas users will look to expand their capacity to increase imports of liquefied natural gas from countries such as Algeria, Egypt and Qatar, and invest in additional storage space to shield themselves from temporary disruptions in supply, said Robert Johnston, director of energy and natural resource analysis at the political-risk company, Eurasia Group.

“You've seen the energy security issue move up the agenda at the EU, and that trend will be reinforced by this current dispute,” Mr. Johnston said. “Europe will continue to diversify its LNG supply base … away from Russia as much as possible.”

Natural gas fuels some 20 per cent of Europe's electricity supply, and Mr. Johnston said the EU will work to cap it through greater reliance on nuclear, clean-coal technology and renewables like wind power.

Source: Globe and Mail

Comments

Lowell said…
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Lowell said…
I love it when politicians get in the middle of something that they don't understand. I will be surprised if anything ends up flowing through the pipes in Ukraine. If the amount of gas is lowered enough, it will not flow! And, also, the pumps are designed to run with a certain minimum volume. If that volume isn't there, you can't run the pumps. And, again, the gas won't flow. This is the same basic physics that governs water, oil, gasoline and even steam. Ahh...but I neglected to mention that this is all about political power; so, physics is suspended.