January 2, 2009 / 2:59 AM / 11 years ago

EU calls crisis talks as Russian gas flow dwindles

MOSCOW/KIEV (Reuters) - European countries began to suffer from reduced gas supplies on Friday after Russia cut deliveries to Ukraine in a contract dispute.

A pressure gauge is seen at a Ukrainian gas compressor station in the village of Boyarka near the capital Kiev, January 1, 2009. REUTERS/Gleb Garanich

The Czech Presidency of the European Union said it would call a crisis meeting of envoys in Brussels on Monday and demanded that existing gas supply deals be honored.

“We feel that the situation has now escalated to a point that substantiates an extraordinary meeting,” Czech presidency spokesman Radek Honzak said. Talks would also probably be called soon with Moscow, another spokesman said.

“Energy relations between the EU and its neighbors should be based on reliability and predictability,” the presidency said in a statement.

“Existing commitments to supply and transit have to be honored under all circumstances.”

Russia’s gas export monopoly Gazprom accused Ukraine of stealing gas in transit. Gas importers in Romania, Hungary and Poland said pressure on their pipelines had dropped.

“Gas inflows from import fell by 30 to 40 percent ... This is because of Ukraine’s dispute with Russia,” Romania’s state-controlled pipeline operator Transgaz director Ioan Rusu told Reuters by telephone.

There were similar reports of less steep supply falls from Budapest and Warsaw.

“Pressure started to decline at 1500 GMT. Pressure is declining continuously. However, the drop has not yet reached a critical level,” Edina Lakatos, a spokeswoman for the Hungarian energy company MOL’s natural gas transmission subsidiary, said.

Ukraine’s state energy firm Naftogaz denied it was illegally siphoning off Russian gas.

Gazprom’s accusation suggested Moscow was in no mood for compromise in a re-run of a 2006 argument that led to supply shortages across the EU.

“The Ukrainian side openly admits it is stealing gas and is not ashamed of this,” Gazprom spokesman Sergei Kupriyanov said, adding that Gazprom had increased exports to Europe via an alternative route — Belarus.

Poland said deliveries from Ukraine had dropped six percent but were being made up by deliveries through Belarus.

“The change in deliveries is not being felt by Polish natural gas consumers,” said gas operator Gaz System and gas monopoly PGNiG in a joint statement.

NEW DOUBTS ABOUT RUSSIA

The European Union — which receives a fifth of its gas via pipelines through Ukraine — had initially said it considered the dispute between Moscow and Kiev to be a bilateral issue.

The row could raise new doubts about Moscow’s reliability as an energy supplier and fuel suspicions in the West — already running high since Russia’s war with Georgia last August — that the Kremlin policy us to bully pro-Western neighbors.

Russia denies politics are behind the dispute and says it is about prices and debts, but the two ex-Soviet neighbors have clashed over a drive by Ukrainian President Viktor Yushchenko to take his country into the NATO alliance.

Earlier on Friday, energy firms in Germany, Bulgaria and Turkey said their supplies were unaffected.

Europe, where temperatures fell below freezing overnight, has enough gas stockpiled to manage without Russian supplies for several days but could face difficulties if any disruption stretched into weeks, analysts said.

Talks between Naftogaz and Gazprom have not resumed since they collapsed two days ago. If they do restart, the negotiators will have to bridge huge differences.

Alexei Miller, CEO of Gazprom, said on Thursday he wanted Ukraine to pay $418 per 1,000 cubic meters (tcm) of gas, compared with the $179.50 Kiev paid in 2008. Ukraine says the most it can afford to pay is $235.

Slideshow (6 Images)

Gazprom charges about $500/tcm to customers in the European Union, though that is likely to fall by up to half this year. Gas prices track oil and crude has plummeted in value.

Gas markets in northwest Europe seemed unconcerned about the supply outlook over the next few days, with prices falling in Britain and Belgium on expectations of warmer weather.

“I guess everyone expects it (the Russia-Ukraine row) to be resolved fairly soon and if it’s resolved over the next day or so then it shouldn’t cause any problems, there is plenty of storage to cover things as well,” one UK gas trader said.

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