Tonight:
14°c
Shareholder anger over executive pay boiled over when investors holding a hefty 42% of the stock refused to back Tesco's decision to make its share option plan even more generous
More...
Europe’s energy crisis deepens as Russia cuts off gas
Robert Lea06.01.09
Europe was plunged into energy crisis today as Russian gas imports were cut by up to 75% and political tensions sent the oil price soaring back above $50 a barrel.
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.
Reader views (14)
Here's a sample of the latest views published.
The spat between Russia & Ukraine is not of interest to Europe.
What is important is that Russia's head of state has sanctioned Gazprom to breach its supply contracts with many European countries who have pre-paid for their energy.
What should be the payback?
We cannot leave it there - without considering the impact.
1. Industries have been widely shut down to preserve such remaining gas for domestic customers. Several cities in Europe have no gas supplies at all & their citizens are huddled in apartments in sb zero temperatures (-10C to -15C.
2. The humanitarian crisis now affects more than 150 million lives (10x more than Gaza to put it in perspective)
There are massive consequential losses to pay as a result of Mr Putin's instructions to Gazprom's Medvedev.
There is also the issue of a crime against humanity on a scale that makes Saddam Hussein look charitable.
- Richard Prior, Bucharest Romania
I can see how ones hatred for a nation can spark peoples opinions without opening their eyes and using common sense... As far as I've seen it, Russia doesn't seem to care about what other nations perceive it as after taking action, and to be honest, I'd prefer using common sense over being "politically correct" any day.
Ukraine couldn't Establish a deal, so they take the supplies, doesn't sound like a deal to me. I agree with Petra and Paul, they can't have it both ways.
- Dorian, USA
It is really difficult to understand what is going on in Ukraine now... Many scenarios are possible: Russia which wants to renew its power over the post soviet coountries pushing them with gas dependance; Ukraine which is unable to pay its bills; Russia and Ukraine which play their own shared game in order to draw more attention to their both power... or whatever else... Anyway - lets just not be too judgemental in our expressions and see what is is going on next. Big politics is a big intrigue while Ukrainian/Russian governments are not all Ukrainian/Russian people! Real people don't want to happen anything bad with native or EU warmth!
- Anna T, Ukraine, Kiev
The Ukraine is dragging the rest of Europe into YOUR dispute with Russia by interfering with, and restricting the flow of gas meant for other EU contries not involved with YOUR dispute. You do so at your own peril and such actions will be remembered when you apply to become a full member of the EU.
- Petra, Birmingham UK
_______________________________________________________
If I was in Ukraine's shoes, I would do the same!
They are no better or worse than the Gazanaians using hospital , schools etc for their arms caches.
Propaganda counts a lot when dealing with a bigger better armed force than yourself. What better way than to try and get the involvement of other countries?
Consider yourself fortunate (Petra, Birmingham UK) that we don't have a land border with Russia the same as the Ukraine, otherwise you might be singing a different tune!
GERONIMO
- Geronimo, LONDON MIDDLESEX
To Maria, Newcastle, Newcastle, UK. It's you who needs to get your facts straight.
For years the Ukraine, Belarus and Moldova have benefited from sweetened energy supply deals with Moscow, a relic of their shared history, with fixed-price contracts, often set for a year or more. However, Western Europe prices are based on 3 month contracts. The Kremlin's desire is to make its former republics pay the same price for gas as countries further west, ie the rest of Europe.
In 2006 Gazprom sought to introduce a new regime, under which the three former Soviet republics would be paying the same rates as Western European by 2011. This has led to an annual arm-wrestling contest as Moscow tries to ratchet prices higher and Kiev and the others seek to resist. So in effect for a number of years Western Europe has been subsidising the supply of Russian gas and oil to the Ukraine and the other former Soviet Republics.
The Ukraine can't have it both ways. You want a clean break from Russia, to become a member of the EU and NATO, but you still want cheap subsidised Russian gas and oil. What do you expect the Russians and Gazprom to do!!
The Ukraine is dragging the rest of Europe into YOUR dispute with Russia by interfering with, and restricting the flow of gas meant for other EU contries not involved with YOUR dispute. You do so at your own peril and such actions will be remembered when you apply to become a full member of the EU.
- Petra, Birmingham UK
this just underlines that we cannot work with or trust Russia, they're back to their old games.
time we also reduced our dependency on the EU too, the UK should be totally independent.
- Michelle, Weybridge
oh well queues at petrol pumps again then,something to look forward to on my return, happy days.
- Rosie, UK(Caymans)
In answer to Roy G: Presumably the same plonker that believes we cause global warming and agreed to buy our electricity from France
- John, London
Get your facts rigt Paul, South of England & for that matter anyone else who thinks Ukraine are pulling a fast one.
Russia insisted that Ukraine pay $418 per 1,000 cubic meters of gas in 2009, more than double the $179.50 it paid the previous year, Gazprom (Russia)then offered it at $250.
Ukrainian officials countered this with an offer of $201 if Russia agreed to raise the price it pays to use Ukraine's pipelines from $1.70 to $2 per 1,000 cubic meters per 100 kilometers. Then Ukraine said it was willing to pay $235, with a transit fee of $1.80.
But Gazprom (Russia) then issued a statement saying that since Ukraine had rejected the $250 offer, it would be charged the current European price of $418.
The price most West European countries pay, however, is set to fall sharply in the spring as a result of the steep drop in the price of oil.
So where’s the justice to Ukraine in that?
Russia has not changed it’s spots since the last war, when it took over many countries by force. It is conforming to it’s true bully boy status with ex-KGB Putin sulking because he lost ownership of Ukraine aand many other states.
- Maria, Newcastle, Newcastle, UK
Because of your love of everything Obama, why don't you call him for help. After all, isn't he the world's Saviour?
- Smokehouse, Fleetwood, USA
Time for EU sanctions against Russia. What a pathetic third world country.
- Frank, Home Counties, England.
Putin, I am freezing. Please send me one of your hot Russian cheerleaders as compensation, or else!
- W_W, Eindhoven, Netherlands
During the last century, each of the European mainland countries has proven unrelaible or facile allies. One lesson we should have learnt is that we do not rely on them for power or grub.
What plonker has made us reliant on Europe to obtain power? The Russians sign contracts - Ha Ha!
- Roy G, Solihull, England
Any blind man on a black horse in the middle of the night can see what is happening here. The Ukraine Government are trying to pull a fast one. They deliberately fail to pay their gas bill, the Russians respond by terminating the gas supply. The Ukraines then interfere with, and hinder the normal gas supply to the rest of Europe. The EU dullards in Brussels do a Dads Army Corporal Jones style 'don't panick Mr Mannering' and hold emergency talks with Russia and the Ukraine. The end result will be the EU paying the Ukraine gas bill to avoid any disruption to European supplies. At a stroke the Ukraine retains its gas supplies, whilst the EU picks up the cost. It's one way of keeping the national budget in check.
- Paul, South of England
