Russia-Ukraine Gas Crisis Spreads into Europe

The natural gas price dispute between Russia and Ukraine has begun to have drastic effects on industry and daily life in southeastern Europe, highlighting Europeâ''s radical dependence on supplies from Russia and the â''stans.â'' Because gas is so attractive, being cleaner and greener than any other fossil fuel, Europe uses more of it all the time, and countries like Germany obtain upwards of half their supplies from pipelines ultimately controlled by Russia. The Putin regime would not dare cut supplies for a country as might as Germany, of course, but for countries of lesser weight itâ''s a different story.

The Financial Times reports today, January 9, that in Bulgaria, which depends entirely on Russian supplies, 70 large and medium companies have lost their supplies completely and gas to another 150 is restricted. Slovakia also has had to limit supplies to industry, in Hungary schools and workplaces will not be able to open tomorrow, and Croatiaâ''s government has declared crisis conditions. Serbia and Bosnia-Herzogovina are having to reduce industrial allocations in order to save gas for home heating.

According to a provocative commentary that appeared earlier this week in the FT, not only does the Russian gas monopoly Gazprom have vital pipeline assets in Ukraine, but Ukraine controls most of the gas storage capacity connected with Russiaâ''s pipeline system. Jerome Guillet and John Evans say that traditionally Ukraine got paid in kind for acting as the transit hub for Russian gas, taking an allocation of gas to cover national needs as payment. The trouble began, they say, when Russia privatized part of the gas transfer system in an attempt to extract cash payments. Tycoons and traders in both Russia and Ukraine now have vested interests in the private trading system, complicating the negotiation of new prices.


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