Russia's natural gas dispute with Ukraine worsened, shutting off fuel shipments to Europe for the first time in three years and driving energy prices higher.
Russia and Ukraine blamed each other for cuts as supplies from OAO Gazprom through Ukraine plummeted, deliveries to the Balkans halted and Slovakia declared an emergency. The spat over prices, transit tariffs and debt caused UK gas to jump as much as 27% and came amid freezing temperatures across Europe.
The dispute, the second in three years, shows how Russian President Dmitry Medvedev and Prime Minister Vladimir Putin are willing to use natural resources as a weapon to achieve political goals. European nations are burning more gas, the source of 24% of the world's energy consumption last year, to reduce emissions linked to global warming.
``If Russia does not ensure gas supplies, other alternatives will be considered,'' said Alexander Rahr, director of Russian programs at the German Council on Foreign Relations. ``Both Russia and Ukraine will lose trust in eastern Europe. There won't be winners.''
NAK Naftogaz Ukrainy Chief Executive Officer Oleh Dubina said he would return to Moscow Jan. 8 to resume talks. In 2006, Russia turned off all Ukrainian gas exports for three days, causing volumes to fall in the European Union, and also cut shipments by 50% last March during related debt claims.
Shipments halted
Gazprom Deputy Chief Executive Officer Alexander Medvedev told Bloomberg Television that Ukraine shut three export pipelines and said ``unilateral action of the Ukrainians'' caused the shortfall. Naftogaz spokesman Valentyn Zemlyanskyi said Gazprom cut shipments to Europe through Ukraine to 74 million cubic meters a day, compared with about 300 million normally.
As the dispute intensified, arctic air from Siberia pushed into Central Europe, northern France, Italy and parts of the U.K., bringing snow and temperatures below minus 25 degrees Celsius (minus 13 degrees Fahrenheit).
The moves came after Russia and Ukraine agreed yesterday to resume talks on their dispute and as Gazprom warned that Ukraine risks amassing a debt of ``billions of dollars'' if the conflict continues. Russia, which supplies a quarter of Europe's gas, cut shipments to Ukraine on Jan. 1.
Russian gas flows to Bulgaria, Turkey, Greece and Macedonia were halted at the Ukrainian-Romanian border, Bulgaria's Energy and Economy Ministry said. Gazprom pumps 17.8 billion cubic meters of gas a year through Bulgaria to the four countries under a 30-year contract signed in 2006. Bulgaria consumes about 3.5 billion cubic meters of that volume.
Gas climbs
Bulgaria raised supplies from its only gas storage facility at Chiren today to 4.3 million cubic meters and called for emergency measures, the ministry said. Russian gas flows through Ukraine and then Romania to the southern Balkan states.
U.K natural gas for immediate delivery gained 13% to 67 pence a therm, a two-month high, in London trading, according to broker ICAP Plc. That's equal to $US9.91 a million British thermal units. A therm is 100,000 Btus. Gas for tomorrow climbed 14% to 69 pence.
Temperatures plunged in Europe overnight, boosting demand for gas to heat homes and businesses. Ukrainian temperatures sank as low as minus 16 degrees Celsius today, according to forecaster CustomWeather Inc. That compares with a seasonal norm of minus 5 degrees.
German cuts
E.ON Ruhrgas AG, the natural gas unit of Germany's biggest utility, said it would experience ``significant'' cuts in gas deliveries, with Russian supplies piped through Ukraine forecast to fall to zero at the Waidhaus gas transit point on the German- Czech border in the course of the day. Continued…
