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Europe begins to feel gas pipeline pinch

The Russia-Ukraine gas war has left some downstream nations with only a mild shortfall, but has incited debate on how to secure energy reserves amid regional instability.

By Correspondent / January 6, 2009

SOURCES: AP, Chicago Tribune, Energy Informaton Administration, ESRI/© 2009 MCT

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Thermometers are plunging across Europe, and so is the pressure in the natural-gas pipelines connecting the continent with its key supplier, Russia.

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But no one is pushing the panic button yet. The five-day-old gas war between Moscow and Kiev appears worse than in past years, aggravated by Ukraine's deepening financial and political crises and Russia's urgent need to refloat its floundering state budget by raising gas prices. Europe, watching closely, has sufficient gas reserves to see it through any short-term crisis and has officially declined to take sides.

The increasingly acerbic dispute, which has seen Russia's state gas monopoly Gazprom accuse its Ukrainian counterpart of "stealing" gas and acting to damage the pipeline that transports 80 percent of Russia's gas exports to Europe, may be doing permanent harm to Moscow's relations with its most important ex-Soviet neighbor. It has also reignited a European debate about how to secure energy supplies amid deepening instability in the resource-rich former Soviet lands to the east.

"When there are problems on these transit routes, this brings insecurity to the energy markets. I think Brussels's strategy [to seek alternative energy routes for Russian gas] is right, but we also see that it can cause a lot of difficulties," says Claudia Kemfert, an energy expert at the German Institute for Economic Research in Munich. "At the end of the day, [Europe] still has a huge dependency on Russian energy, and this is a little bit dangerous." [Editor's note: The original version misspelled the last name of Claudia Kemfert.]

Russia's relations with Ukraine have been deteriorating since the pro-democracy "Orange Revolution" brought Ukrainian President Viktor Yushchenko to power four years ago, pledging to bring the nation of 50 million into the NATO security alliance and draw it closer to the European Union. Soon after, Russia began demanding that Ukraine begin paying world market prices for its formerly subsidized Russian oil and gas and, to drive the point home, first shut down the pipeline on New Year's Day 2006. Last year, Ukraine paid on average $180 per thousand cubic meters of Russian gas, far below European rates, and Gazprom is demanding that it pay $418 for the same amount in the yet-to-be-concluded 2009 contract.

"The problem is that Ukraine is bankrupt, politically and economically," says Konstantin Zatullin, deputy chair of the Russian State Duma's commission on the Commonwealth of Independent States. "They are violating all their obligations and dragging out the situation to no constructive end. Russia had no choice but to cut off their gas. Is there any place in the world where people receive energy supplies free of charge?"

Gazprom ceased pumping Ukraine's share of gas into the pipeline late last week, and by Monday at least six European countries had reported reduced pressure. Sergei Kupriyanov, a Gazprom spokesman, told journalists Ukraine has "stolen" some 25 million cubic meters of gas, passing on the shortfall to European customers.