Europe Short Of Gas As Russia, Ukraine Wrangle

MOSCOW, Russia -- Much of Europe and parts of the former Soviet Union battled energy shortages on Friday as Russia failed to pump enough gas to meet demand that was boosted by unusually cold winter weather.


Russia supplies a quarter of the region's gas needs and, until this year, had been a dependable supplier.

But a pricing row with Ukraine, transit route for 80 percent of Russia's gas exports, and a cold snap persisting in major consuming nations, has hit supplies to industry and households across the continent.

Worst off was the ex-Soviet state of Georgia, where mystery explosions on gas export pipelines in southern Russia have cut supplies. Many people on Friday could not cook a hot meal or heat their homes.

Schools and factories closed, while high winds downed a power line serving the east of the Caucasian state, forcing people to hunt for fuel.

"I've spent several hours in a queue for kerosene and wood this morning. But I'm happy I've finally got it," said Maya Khubuluri, a 49-year-old resident of the capital Tbilisi.

Parts of Russia's war-torn southern region of Chechnya were cut off too. Many people there live in homes damaged during 11 years of civil conflict, leaving them exposed to temperatures as low as minus 15 Celsius (5 Fahrenheit).

Big consumer Italy turned down heating in offices, factories and apartment blocks to conserve supplies. People disregarding an order to save energy face an 800 euro ($975) fine.

Industry Minister Claudio Scajola rushed to Moscow for emergency talks on the energy crisis with Russian Energy Minister Viktor Khristenko.

Italy plans to present a paper on energy security at next month's meeting of finance ministers from the Group of Eight industrialised nations, being hosted by Russia in Moscow.

A top European Union official threw his weight behind that initiative. "It is crucial," the bloc's monetary affairs commissioner, Joaquin Almunia, told Reuters on the sidelines of the World Economic Forum in Davos.

Russia has made energy security a major theme of its first annual presidency of the G8, but the angry reaction of the West to the gas supply disruptions has turned the initiative into a political boomerang.

RUSSIA-UKRAINE ROW RUMBLES ON

Russia stunned Europe by cutting gas supplies to Ukraine for two days over the New Year in its drive to get its former Soviet neighbour to pay nearly twice as much for gas imports.

But a deal struck on Jan. 4 triggered a constitutional crisis in Kiev, pitting parliament against President Viktor Yushchenko's government.

With political life in Ukraine paralysed, expert-level talks in Kiev on finalising a contract are making slow progress.

Meanwhile, temperatures remain below average for the time of year, with parts of eastern Europe gripped by a freeze which sent the mercury below minus 30 Celsius (minus 22 Fahrenheit).

Russia's gas monopoly Gazprom (GAZP.MM: Quote, Profile, Research) has accused Ukraine of "illegally taking" more gas than contractually allowed. Peak daily offtake by Ukraine has reached 80 million cubic metres in recent days -- equal to Italy's consumption.

The resulting shortages in transit supplies cut deliveries to Poland this week by as much as 38 percent this week. Polish distributor PGNiG (PGNI.WA: Quote, Profile, Research) said demand was still outstripping supply, forcing cuts in sales to industrial users.

Turkey on Thursday briefly limited the flow of gas to 21 factories in the northwest, including plants run by Ford Motor Co., Goodyear Tire & Rubber Co. and Hyundai Motor Co.

END IN SIGHT?

Russia's customers said on Friday that supplies could soon get back to normal, however, with the shortfall to Italy recovering to 2.7 percent from 5.4 percent on Thursday, according to oil and gas firm Eni (ENI.MI: Quote, Profile, Research).

In the Balkans, Serbia said supplies should be fully restored by Sunday after a 25 percent cut earlier this month.

Alexander Medvedev, head of Gazprom's export arm, told Serbian Deputy Prime Minister Miroljub Labus in Belgrade that supplies would return to the agreed levels of 10 million cubic metres a day by the end of the week.

"Medvedev gave assurances that the normalisation of supplies will start from today," Labus' office said in a statement.

Source: Reuters

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