EU faces deepening energy crunch over Russian gas

By Christian Lowe

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.