EU faces deepening energy crunch over Russian gas

MOSCOW (Reuters) - Europe faced a deepening energy crunch and more sub-zero temperatures on Wednesday, with Moscow and Kiev showing little sign of a swift resolution of a pricing dispute that has slashed Russian gas supplies to the West.

Russia accused its former Soviet neighbor of stealing about 15 percent the gas it ships across Ukraine to European states.

"Ukraine has stolen gas not from Russia, but from consumers who have bought the product and paid for it," Prime Minister Vladimir Putin said in televised remarks late on Tuesday.

Ukraine's pro-West President Viktor Yushchenko blamed Moscow for the supply disruptions, saying Moscow would continue to close the gas taps to Europe or stop them altogether.

Europe's heavy dependence on Russian energy -- and its vulnerability to supply disruption -- was highlighted when Moscow reduced volumes to Ukraine on New Year's Day after failing to reach agreement with Kiev over debts and gas prices.

So far Eastern and central Europe have borne the brunt of the row, Bulgaria talking of "a crisis situation" and cutting or suspending supplies to industrial users. Two fertilizer companies had to halt production.

France and Italy also reported a steep drop in supplies but the euro zone's major economies have so far escaped any economic repercussions.

Nevertheless, German energy provider E.ON Ruhrgas said drastic cuts and a prolonged cold spell could cause shortages. High energy users like aluminum, glass and metals makers could be hurt by a lengthy crisis.

The escalating price dispute and cold snap drove the British gas market, Europe's biggest and most liquid, to its highest level since October. By late trade, day-ahead baseload gas was 12.76 percent higher.

The European Union gets a quarter of its gas from Russia, 80 percent of it via Ukraine, and officials from the bloc's current president, the Czech Republic, met both sides on Tuesday to urge an early resumption of talks.

"The Russian side ... is ready for this step. We are too and I expect the Ukrainian side, after the talks in Kiev, is also ready," said Czech Industry Minister Martin Riman.

He spoke after talks in Berlin with Alexander Medvedev, the deputy CEO of Russian gas export monopoly Gazprom. Earlier in the day he met Ukrainian officials in Kiev.

THREE-WAY SUMMIT

The head of Ukraine's state energy firm said he would fly to Moscow on Thursday for talks and Prague said it was considering the "extreme option" of a three-way EU-Russia-Ukraine summit.

EU members Austria and Romania said deliveries were down 90 percent and 75 percent respectively, while Hungary, Bulgaria, Turkey, Macedonia, Greece and Croatia all said Russian gas flows via Ukraine had halted.

Neighboring Slovakia will declare a state of emergency, Czech news agency CTK reported. Poland cut gas supplies to industrial clients, while Serbia and Bosnia said Russian supplies had completely stopped.

Energy analysts say it would take weeks or months of serious supply problems for customers in Western Europe to feel the impact of the row. Most bigger EU countries have large amounts of gas stockpiled after several mild winters and have access to supplies from sources such as Norway and Algeria.

The gas row is another irritant to Moscow's fraught ties with the West, already badly damaged by Russia's war with Georgia last year.

Russia and Ukraine have clashed repeatedly on a range of other issues, particularly the ambition of Ukraine's pro-Western leaders to join NATO.

U.S. State Department spokesman Sean McCormack said the gas cut offs were unacceptable and welcomed the prospect of renewed talks between the two sides on Thursday.

"This episode underscores the critical need to diversify sources of natural gas, as well as other energy supplies," he told reporters.

Worries about European gas supplies, coupled with Israel's military operation in Gaza, have pushed oil prices up to a three-week high close to $50 a barrel. Russia, whose main export is oil, stands to benefit from a recovery in prices.

(Writing by Jon Boyle; editing by Myra MacDonald)