Russia gas dispute hits EU security, aids rivals

By Gerard Wynn and Nina Chestney - Analysis

LONDON (Reuters) - Nuclear power may be the winner from a shutdown of Russian gas exports that has highlighted Europe's vulnerability and limited energy options.

Bulgarians shivered in their homes on Wednesday as one of the most affected countries rationed supplies following its switch to gas stores.

The question is whether the fear factor of no heating during a freezing mid-winter will prompt strategic changes in EU-wide energy policy and investment, for example to increase coal, nuclear or renewables or alternative routes to other suppliers.

"I would definitely push the European countries to get alternative ways of generating electricity," said Fatih Birol, chief economist of the International Energy Agency, the Paris-based energy watchdog for rich countries.

"Gas is mainly used for electricity generation, and a key option here is nuclear," he told Reuters.

"This is in a sense a very good wake up call for the European Union," he said adding global gas production was becoming ever more concentrated among countries where state-run companies like Russia's Gazprom dominated.

The European Union is dependent on Russia for around a quarter of its gas. All supplies via the main Ukraine transit pipeline halted on Wednesday following a Moscow-Kiev rift over gas prices. They blamed each other for blocking EU supplies.

The most vulnerable countries were those with the least domestic gas storage capacity and fewest alternative sources. Countries most at risk were Bulgaria, Romania, Turkey, Greece, Slovakia, Hungary and the Czech Republic, said Birol.

The suspicion has grown that Moscow may have harmed itself in a second price dispute with Ukraine in three years, almost snuffing out EU supplies just months after Russia's war with another key European energy transit country Georgia. "The fact is that supplies to the European Union are not arriving to lots of member states at this time," said Ferran Tarradellas, energy spokesman for the EU's executive Commission.

"This is not what you expect of reliable supply and transit countries. It's affecting us, and they're not even negotiating. It's not helping their reputation at all. It's too early to say," he said, regarding the impact on long-run EU energy choices.

Russia and Ukraine meet on Thursday to discuss the crisis.

SECURITY

Europe's options for change range from simply adding new gas storage capacity, to building new gas pipelines to Russia and other countries, by-passing Ukraine, to switching away from gas.

The short-term priority was more storage, analysts said.

The next was finding alternative routes. The three main ongoing pipeline projects are: Nord Stream, from Russia via the Baltic Sea; Nabucco, from Central Asia via Turkey; and Medgaz, from Algeria to southern Europe.