Gas Supplies Drop Across Europe as Russia-Ukraine Dispute Drags On

By , Money Morning •

By Jason Simpkins
Associate Editor
Money Morning

Supplies of natural gas have fallen sharply across Europe and are now approaching crisis levels, as the standoff between Russia and Ukraine continues to drag on.

Austria, Bulgaria, Croatia, Germany, Greece, Italy, Macedonia, Poland, Romania, Slovakia, Turkey and the Czech Republic all have said that gas shipments coming through Ukraine had stopped or fallen sharply.

Italy, Greece, and the Balkans have been among the hardest hit by the ongoing dispute.

As of yesterday (Tuesday) Russian gas deliveries to Italy had fallen by 80% and supplies to Greece were down 33%. Russian supplies to Romania have dropped by 75%.  Croatia said it was reducing supplies to industrial consumers and Slovakia is preparing to declare a state of emergency, the Washington Post reported.

Bulgaria, which relies on Russia for all of its natural gas, said it is close to restarting a shuttered nuclear reactor after two of its cities were left without gas on one of the coldest days of winter. About 12,000 households lost central heating, according to the Associated Press. 

"We are facing a serious natural gas crisis in which Bulgaria is a victim of the conflict between Russia and Ukraine,"said Bulgarian Prime Minister Sergei Stanishev.

Russia and Ukraine are blaming each other for the shortages. OAO Gazprom, Russia's state-run energy monopoly, accused Ukraine of siphoning gas from supplies intended for its neighbors, as well as shutting down three export pipelines.

"Ukraine alone is wholly to blame for the situation," said Gazprom spokesman Sergei Kupryanov.

Meanwhile, NAK Naftogaz Ukrainy, Ukraine's state gas company, has rejected the Russian accusations that it is stealing gas, saying the country has adequate supplies to last through April. Naftogaz also alleges that Russia halted gas deliveries through the three disputed pipelines.

"We did not turn anything off. There is simply no gas there," said Naftogaz spokesman Valentyn Zemlyansky.

Total flow of gas from Russia plunged Tuesday morning to 73.8 million cubic meters per day, down from 315 million Monday, the company said.

Still, at the heart of the dispute is more than $500 million in late fees and fines that Gazprom claims it is owed by Ukraine. There also remains that matter of new supply and delivery contracts for 2009.

Naftogaz said it would resume talks in Moscow on Thursday, raising hopes that the weeklong dispute will end sooner rather than later.

 "I have spoken with [Gazporm chief executive Alexei] Miller" said Oleg Dubyna, chairman of Naftogaz. "I will fly to Moscow on January 8 to continue talks."

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