Europe’s energy crisis deepens as Russia cuts off gas

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The row immediately sparked fears of gas-supply shortages and rising energy prices just as winter demand in the UK peaked following one of the coldest nights this century, with temperatures plunging to as low as minus 10C.

Overnight, Russian Prime Minister Vladimir Putin ordered the state energy giant Gazprom to cut supplies to and through Ukraine to Europe from the normal 300 million cubic metres to 74 million. The embargo followed an escalation of a huge political row between Moscow and Kiev.

Ukraine says Putin and Russian president Dmitry Medvedev are flexing their political muscles in the region in a perennial dispute over payments and prices.

Russia says its neighbour has been siphoning off and stealing Russian gas, and accuses Ukraine shutting down three pipelines.

"We became hostage of irresponsible behaviour of a transit country," said Medvedev. "The situation is very serious. Russia has requested that the gas which was stolen, which is equivalent to 65 million cubic metres, should be returned."

The effects of the dispute on the rest of Europe are stark.

The European Union is reckoned to be 25% reliant on Russian exports, and around 80% of the gas the EU receives from Russia comes through Ukraine.

The UK appears as yet to be unaffected. The Department of Energy says the UK takes as little as 2% of its supplies from Russia.

Despite the National Grid recording seasonally high demands, the interconnector pipeline from the UK to Europe via Belgium is currently delivering UK exports to the continent. But the crisis raises the spectre of the UK's longer-term net reliance on imports, and it has provoked a leap in spot energy prices.

Wholesale gas for immediate delivery soared 18% to as high as 70p a therm.

In addition to the Russian crisis, the gas price is closely linked to the price of oil which today was also leaping, with Brent Crude up $1.67 at $51.29, the first time it has been back above $50 a barrel since the end of November.