Russian gas begins to flow into wary Europe

http://www.guardian.co.uk/world/2009/jan/21/russia-europe-gas

Siberian gas started flowing into the EU yesterday, ending the bitter dispute between Russia and Ukraine that shredded both countries' reputations as fuel suppliers and left Europe desperately seeking to shift its energy policies away from dependence on Russian monopolies.

A new 10-year deal on gas pricing and transit between the Russian and Ukrainian state gas firms, Gazprom and Naftogaz, saw Russia pumping the gas through Ukraine's pipelines to Slovakia in the EU while Kiev allowed the fuel to flow without interruption.

The resumption of supplies appeared to end the worst, so far, of a series of disputes of distinctly political hue between Russia and its former Soviet underling, Ukraine.

After an agreement between the Russian prime minister, Vladimir Putin, and his Ukrainian counterpart, Yuliya Tymoshenko, European leaders congratulated themselves on their mediation efforts but gave warning that the three-week gas dispute served as a rude awakening.

"This has been a team effort and an effective unified voice," said José Manuel Barroso, president of the European commission. "It is difficult to welcome something that should not have happened in the first place. It was utterly unacceptable that European gas consumers were held hostage."

In addition to aggrieving European consumers, the dispute has cost Gazprom more than $1bn in lost revenue at a time of acute economic distress.

Ukraine, however, has arguably suffered more. The deal struck doubles the price Ukraine pays for its Russian gas. Kiev's reputation has taken a hammering and its aspirations for integration with Europe and the west have been set back.

In the vicious power struggle raging in Ukraine, Tymoshenko has outdone the country's pro-western president, Viktor Yushchenko, whom she wants to replace. The gas dispute has enabled Putin to score points against Yushchenko, too.

Some 20 countries in Europe have been without Russian gas for a fortnight at the height of winter. This has caused traditionally pro-Moscow countries to reconsider allegiances and pushed Europe to revitalise attempts to shore up energy security, lessening its exposure to Russia.

Central to those plans is a pipeline bypassing Russia and transporting Caspian gas to Europe. That project, however, was also set back on Monday when Turkey threatened to paralyse the scheme.

Recep Tayyip Erdogan, the Turkish prime minister, said in Brussels that he would review Ankara's involvement in the Nabucco pipeline if negotiations for EU membership remained on hold.

Turkey is pivotal as it will host a big stretch of the 2,000-mile pipeline from Azerbaijan to Austria.

Erdogan also questioned the concept behind Nabucco, stating that there was not enough gas available to make the project feasible. Construction of Nabucco by a consortium of six national gas companies is supposed to begin next year.

"We have to stop simply talking about energy security in Europe and start doing something," said Barroso.

He pledged to take the issue to an EU summit in March. The Czechs, holders of the EU presidency, want to stage a special summit on the pipeline project in May.