Europe faces energy crisis as Vladimir Putin cuts Russian gas supply

The Telegraph

By Miriam Elder in Moscow and Bruno Waterfield in Brussels
Last Updated: 10:38PM GMT 05 Jan 2009

Europe has been plunged into an energy crisis after Vladimir Putin ordered Russia's state-run gas company to cut supplies by 20 per cent.

As temperatures dropped below zero across much of Europe, the Russian prime minister instructed the head of Gazprom: "Cut it - starting today."

The cut was ordered to punish neighbouring Ukraine, which Russia accuses of topping up its own gas supply by siphoning off energy meant for European consumers and sent through its pipelines.

But Naftogaz, Ukraine's state-run gas company, said that it was European Union countries, including Britain, that would feel the effects of an increasingly bitter East-West energy row.

"Gazprom has in fact cut volumes of transit gas to European customers. The Russian company has therefore placed under threat the delivery of gas to European countries," Naftogaz said in a statement.

The EU meanwhile dispatched an emergency fact-finding mission to Ukraine after eight European countries reported a disruption of gas supplies following a smaller Russian cut last week.

The taskforce of senior officials from the European Commission and the Czech Republic, which has just taken over the EU's rotating presidency, will also hold crisis talks with Gazprom on Tuesday.

EU foreign ministers, meeting in Prague on Thursday, will then assess levels of gas supply disruption and discuss possible action to prevent energy shortages amid sub-zero temperatures in most European capitals.

EU countries are dependent for one quarter of their gas supplies on Russia, of which 80 per cent comes via pipelines that cross the Ukraine.

Some, such as Poland, depend on Gazprom for over three quarters of their gas supply. Britain receives up to 15 per cent of its supply from Russian sources, mainly channelled through French pipelines.

The Czech Republic, Poland, Greece, Romania, Bulgaria, Slovakia, Croatia and Hungary have already reported problems with their supply.

The Commission has insisted that "there is no immediate danger of disruption for European citizens". But officials are worried that the latest wave of freezing weather, in one of the coldest winters for years, will push the EU into a full blown energy crisis by fuelling demand for Russian gas as people seek to heat their homes across Europe.

"The situation is changing. We are seeing a cold week ahead," said the Commission spokesman."Cold weather has an immediate effect on demand.

The supply of gas has to be higher or complemented with more use of storage."

At a meeting at Mr Putin's luxury dacha, he backed demands by Alexei Miller, the CEO of Gazprom, for a daily reduction to Ukraine's pipeline gas flow of 65.3 million cubic metres, energy that Russia claims that the Kiev has stolen during a price dispute.

Gazprom first started to cut gas supplies to Ukraine on New Year's Day, after talks over a supply contract broke down amid accusations that Kiev had failed to pay its full bill for 2008. Naftogaz denies allegations it has siphoned off gas without paying Russia.

Russian Prime Minister Vladimir Putin at the opening ceremony of the Gas Exporting Countries Forum in Moscow.