Stand-off cuts gas supplies to Europe

European countries on Monday suffered large cuts to their gas supplies as a bitter stand-off between Russia and Ukraine over gas prices intensified.

Supplies of Russian gas to Italy fell by 25 per cent, according to Eni, the country’s biggest oil and gas supplier. Deliveries of Russian gas to France dropped up to 30 per cent, Gaz de France said. Many central and eastern European countries, which depend heavily on gas from Russia, reported even larger declines.

European governments urged Russia and Ukraine to resolve their dispute over the price Moscow charges the former Soviet republic, which reached a head on January 1 when Russia cut the amount of gas flowing into the pipeline. The European Union is due to hold a crisis meeting in Brussels on Wednesday.

Gazprom, Russia’s state-owned gas monopoly, on Monday promised to export more gas to Europe to make up for the shortfall caused, it claimed, by Ukraine illegally siphoning gas from the pipeline.

“With the aim of preventing a possible energy crisis, caused by Ukraine illegally taking gas, Gazprom has taken the decision to deliver additional gas into the gas transport system of Ukraine,” the company said.

Europe obtains a quarter of its gas from Russia, and around 90 per cent of its supply crosses Ukraine by pipeline. In spite of assurances from Russia that its dispute with its neighbour would not affect the region’s gas supplies, the pressure fell sharply on Monday in one of Europe’s principal import pipelines.

Gas flows through Slovakia’s long-distance pipeline - the main gateway for Russian gas to western Europe - had dropped 30 per cent on Monday, according to the economy ministry. Hungary, one of the most vulnerable countries in the region because it relies on Russian gas for almost 40 per cent of its total energy needs, saw supplies drop by half on Sunday night.

Poland said it was receiving about a third less gas through the pipeline, while Austria’s OMV, the oil and gas company, said its supplies of Russian gas had fallen by the same amount. The former Soviet republic of Moldova said it had not received any Russian gas for two days.

Russia, which this month took over the rotating presidency of the Group of Eight industrialised nations, faced growing criticism from abroad for its hardball tactics. On Monday the International Energy Agency warned that Russia’s international reputation could be jeopardised by its actions.

“They have a great reputation as an energy supplier but this is now at risk with recent events,” said Noé van Hulst, director of policy analysis at the IEA, the consuming nations’ watchdog.

The IEA and EU said the situation was “manageable” in the short term because many European nations had a lot of gas in storage. However, cuts to homes and businesses cannot be ruled out if supplies are not restored soon. Intensive gas users have been ordered to switch to oil in some countries.

Russia and Ukraine traded bitter accusations on Monday, with the row showing no signs of being resolved. Russia accused Ukraine of stealing 100m cubic metres of gas worth $25m from the pipeline in the first 24 hours of the cut-off. Ukraine’s president, Viktor Yushchenko, denied the charge, saying there had “not been a single cubic metre of gas from Russia” for several days.

Ukraine has said it will take only the amount it is entitled to for transporting the gas through its territory – about 15 per cent of the total flow.

By Thomas Catan and Javier Blas in London, Hugh Williamson in Berlin and Gerrit Wiesmann in Frankfurt, Robert Anderson in Prague, Jan Cienski in Warsaw and Neil Buckley in Moscow.

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