Gas row exposes east Europe's Achilles heel

By Anna Mudeva - Analysis

SOFIA (Reuters) - Energy security has long been a weak spot in eastern Europe but the cut in Russian gas supplies this week shows just how vulnerable the region is and the urgent need to tackle long-neglected problems.

Hundreds of thousands in the Balkans were left without gas heating in the middle of the winter and dozens of factories across eastern and central Europe were forced to halt production.

Blackouts and power rationing could come next if freezing weather and the price row between Moscow and Kiev that choked off gas supplies, continues next week, industry officials warn.

The disruption, which Bulgaria and Croatia called a crisis, is exacerbated by a lack of pipeline links between countries in the region, outdated Soviet-era grid infrastructure, transmission losses and wasteful energy use.

"This is a big lesson for us all to realise how dependent we are and to find ways to reduce this dependence," said EU Consumer Affairs Commissioner Meglena Kuneva, whose native Bulgaria was among the worst hit.

"We have seen paradoxes -- gas from one part of Slovakia could not be brought to another one simply because there is no pipeline connection," she said.

Former communist eastern Europe has so far done little to reduce its huge reliance on its former Soviet master, Russia, and on single supply routes, analysts said.

Some, like Serbia and Bosnia, not only depend fully on Russian gas, but have no storage reserves either.

Bulgaria's leading business group accused the government of "amnesia" for forgetting the lessons of a similar gas row in 2006, which also impacted flows to Europe. The current row cut off all supplies via Ukraine to the continent on Wednesday.

INTERNAL LINKS

Eastern Europe's best bet to raise energy security in the short-term is to build internal pipeline links and connect its gas network with that of western Europe, analysts said.

"Investment in regional infrastructure and greater interconnection of both gas and power markets would...allow the region to cope better with supply shocks," said IEA's Tim Gould, an expert on the Caspian, Caucasus and southeast Europe.

The gas crisis should speed up work on an initiative of eight central and southeast European countries to link their gas pipeline networks, first announced last year and still on the drawing table.

The project, which includes Hungary, Austria, Slovenia, Croatia, Bosnia, Serbia, Romania and Bulgaria would allow them to import gas from Azerbaijan and the North Sea, officials say.

Earlier this week, Sofia sought financial aid from Brussels to build a delayed 80 km link to an existing Turkey-Greece pipeline and start importing Azeri gas. It also needs to build a 15 km stretch to Romania.