Image: A worker turns a tap at a gas receiving station
Laszlo Beliczay  /  EPA
A worker is seen at a gas receiving station in Vecses, Hungary, on Tuesday. Hungary is among the European countries being hit by a price dispute between Russian and Ukraine.
updated 1/7/2009 10:26:13 AM ET 2009-01-07T15:26:13

Russia shut off all gas supplies to Europe through Ukraine on Wednesday — leaving more than a dozen countries scrambling to cope during a winter cold snap. Prime Minister Vladimir Putin publicly endorsed the move and urged that international observers be brought into the energy dispute.

The effects of the gas cutoff reverberated across the continent, where some countries have substantial reserves and others do not. The EU accused both nations of using consumers as pawns in their quarrel, and tens of thousands of people, mostly in Bulgaria, were without central heating.

"It is unacceptable that the EU gas supply security is taken hostage to negotiations between Russia and Ukraine," EU spokeswoman Pia Ahrenkilde Hansen said, demanding an immediate resumption of gas supplies.

The cutoff comes on Orthodox Christmas, celebrated in Russia, Ukraine and a number of other Orthodox Christian countries in Europe.

Russia's gas monopoly Gazprom, which had sharply limited supplies through Ukraine on Tuesday, stopped all remaining gas shipments through the country as of 7:44 a.m. local time Wednesday, Ukraine's gas company Naftogaz said.

Russia confirmed the cutoff, but said it was Ukraine's fault because it had shut down the last pipeline carrying gas from Russia. Gazprom said it had continued to deliver gas to Ukraine, although in reduced volumes to compensate for the gas it accuses Ukraine of diverting.

'International observers'
But later Wednesday, Prime Minister Vladimir Putin ordered Gazprom to stop all shipments of natural gas to Ukraine.

This should be done "publicly and in the presence of international observers," Putin told Gazprom CEO Alexei Miller.

About 80 percent of Russian gas to Europe is shipped through pipelines crossing Ukraine. Other smaller pipelines run through Belarus and Turkey.

As of Wednesday, nations including Bulgaria, Croatia, the Czech Republic, Greece, Italy, Macedonia, Romania, Serbia, Slovakia, Slovenia and Turkey all reported a halt in Russian gas shipments. Others — including Austria, France, Germany, Hungary and Poland — reported substantial drops in supplies.

In the Balkans, people celebrating Orthodox Christmas scrambled to find other sources of heat for their homes as authorities cut off some gas to conserve supplies.

Schools and kindergartens in Bulgaria closed down because utilities needed time to switch to alternative fuels. In Bosnia, where gas operator Sarajevogas said the situation was close to a humanitarian disaster, woodcutters revved up chain saws to cut wood for fireplaces.

Diplomatic efforts
Romania, Bulgaria and other countries held national security meetings to address the issue, while Hungary and Slovakia, which receives all of its gas from Russia, began reducing natural gas deliveries to big industrial customers.

Diplomatic efforts to end the dispute cranked into high gear. EU Commission President Jose Manuel Barroso spoke with the Russian and Ukrainian prime ministers, pressing for a quick resolution of the standoff.

Prime Minister Mirek Topolanek of the Czech Republic, which holds the EU presidency, hinted that future relations were at stake unless the dispute was resolved by Thursday, when Ukraine and Russia hold the first face-to-face talks since the breakdown of negotiations Dec. 31.

Ukrainian President Viktor Yushchenko sent a letter to Barroso and Russian President Dmitry Medvedev calling for Russia to resume gas shipments. Russia in turn demanded that Ukraine immediately stop illegal siphoning.

Norway, another big gas supplier to Europe, said it cannot do much to offset shortfalls in Russian gas deliveries as it is near maximum production and pipeline capacity for exports.

Russia stopped all gas shipments to Ukraine on Jan. 1 after the two countries failed to agree on prices and transit fees for 2009. Gazprom also insists that Naftogaz still owes $600 million for 2008.

In 2008, Russia charged Ukraine about half what it charged its European customers for gas. The subsidy is a legacy of the Soviet era, when both countries were part of the Soviet Union.

Gazprom has long sought to charge Ukraine European-level prices. Ukraine says that if it pays more for natural gas, Russia should pay more for shipping that gas through Ukraine.

Ukraine may be in the stronger negotiating position. The country had about 16 billion cubic meters of gas in its vast underground storage system as of Tuesday. With Ukraine also producing some of its own gas, the country should not see shortages until early April, the government says.

Gazprom, meanwhile, is losing substantial income during a peak season for gas consumption. On a typical winter day, experts say, Gazprom would be pumping about 350 million cubic meters of gas to Europe through Ukraine. It also will soon see an excess of gas in its system, which will create a costly storage problem.

Russia has tried to divert some of its gas exports around Ukraine, through pipelines via Turkey and Belarus. But Gazprom relies on Ukraine's vast pipeline network to deliver the bulk of those exports.

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