Page last updated at 13:55 GMT, Tuesday, 6 January 2009

Europe's reliance on Russian gas

By Andrew Walker
Economics correspondent, BBC World Service

A gas storage and transit point on the main gas pipeline from Russia in the village of Boyarka near the capital Kiev, Ukraine
Turned-off taps have caused gas shortages in Europe

The latest developments in the dispute over the price Ukraine pays Russia for its gas has yet again affected deliveries to other countries.

Several countries in Europe have reported a sharp decline or even complete cessation of gas supplies from Russia via pipelines through Ukraine.

This has reinforced unease in Europe about the important role that Russia has a supplier of gas.

A quarter of the gas used in the European Union (EU) comes from Russia.

And that share will rise.

Increasingly dominant

Europe's need for gas is likely to increase.

Europe's gas pipeline network

Economic growth, when it resumes after the current recession, will mean more demand for electricity.

Gas accounts for about a fifth of the EU's electricity and the share is likely to grow, partly because gas produces less by way of greenhouse gas emissions than coal or oil.

The EU does have other suppliers, including Norway and Algeria by pipeline, and Qatar and Algeria, again, by ship.

But Russia, with the world's largest gas reserves and an extensive network of pipelines to Europe, is likely to be increasingly dominant.

Soviet legacy

The EU, unless it drastically changes its energy strategy, will need Russia.

EU GAS IMPORTS FROM RUSSIA
100% dependent on Russia: Latvia, Slovakia, Finland, Estonia
More than 80% dependent: Bulgaria, Lithuania, Czech Republic
More than 60% dependent: Greece, Austria, Hungary
Source: European Council on Foreign Relations, 2006 figures

But Russia in turn needs Europe to buy its gas, and also its oil.

So it is not in Russia's interest for Europe to become more wary of using gas as an energy source.

So far the disturbances to EU supplies have been a side effect of the recurrent dispute between Russia and Ukraine, with both sides blaming the other for the reduced supplies to the west.

The quarrels are a legacy of the end of the Soviet Union.

Ukraine has been receiving relatively cheap gas.

Russia's Gazprom wants to charge more, and the negotiations are complicated further by questions about what fees Ukraine should receive for gas crossing its territory.

Some European countries are protected with substantial stocks to cover any supply disruptions for many weeks, although some, such as Bulgaria have very little cover.

The disruptions also reinforce the attractions of developing new pipelines that avoid potential problem areas.


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