Row Over Russian Gas Chokes Supply to Rest of Europe

Germany, Russia's biggest political ally in Europe, tonight warned that its supply of Russian gas could swiftly collapse as the dispute between Ukraine and Moscow intensified and Europeans began freezing in their homes.

The Russian monopoly provider Gazprom accused Ukraine of filching gas supplies due for Europe.

The row escalated today, with gas volumes slashed even further, as a swathe of countries in eastern and southern Europe reported a complete shutdown of supplies or serious disruption on the coldest day of the winter. Russian shipments of gas to the Balkans, including Romania, Bulgaria, Croatia, Macedonia, Greece, Bosnia, Serbia and, beyond them, to Turkey shut down or were slashed by up to two thirds.

The disruption of supplies also spread to Italy, Austria, Slovakia, the Czech republic, Hungary and Slovenia as well as Poland.

Amid a growing political and diplomatic crisis, Oleh Dubyna, head of Naftogaz, Ukraine's state energy firm, said he would restart negotiations on price contracts in Moscow on Thursday with Gazprom executives.

Failure of these talks could force leading EU governments to switch supplies of gas to a growing number of European countries hit by acute shortages from Russia via Ukraine. Europe gets a quarter of its gas from Russia and 80% of this passes through Ukraine.

The EU's gas coordination group will meet in emergency session on Friday, to consider shifting plentiful supplies of gas held in storage in unscathed countries to those "in distress". Slovakia declared a state of emergency tonight, while other countries said they were in crisis.

Bulgaria, one of the hardest hit, said people had started freezing as it began moves to reboot a controversial nuclear power plant. Ukraine said it would switch heating to fuel oil as other European countries began a desperate search for alternative supplies, with Turkey turning to Iran.

These moves emerged as the Czech premier, Mirek Topolanek, the current EU president, raised the "extreme option" of a three-way summit with Russia and Ukraine to resolve the growing political crisis, while Russia and Ukraine continued to blame each other for the commercial and political deadlock.

In London, Gazprom's deputy chief executive, Alexander Medvedev, accused Ukraine of unilaterally closing three export pipelines without warning. "It is unprecedented in the history of the gas market," he told reporters.

"Ukraine is in obvious breach of its obligations as a transit country... We have become a hostage to irresponsible behavior."

Ukraine insisted that the fault lay with Russia. Naftogaz, the Ukrainian state gas company, denied it was to blame for the sharp drop in supplies, and said Gazprom had itself rerouted gas to just one out of the four pipes. "We did not turn anything off, there is simply no gas there, there is zero," Naftogaz spokesman Valentyn Zemlyansky told the Kiev Post.

E.On, Germany's biggest energy firm, said supplies could run out if the cuts and sub-zero temperatures continued. Wingas, co-owned by the chemicals group BASF, issued a similar warning. Both are close Gazprom partners.

Tonight, the supply cuts spread to France, where GDF Suez, the country's biggest gas group, reported reductions of more than 70% via Ukraine.

Medvedev, who later held talks in Berlin with the German government and senior EU officials, accused Kiev of acting for political, not commercial reasons, and demanded the return of stolen gas. Gazprom tried to alleviate

the situation among EU customers by switching supplies via other routes. But Ukrainian officials accused the Russians of playing "cat and mouse" and of deliberately creating serious problems. The two sides are in dispute

over price increases imposed on Naftogaz. Prior to the Berlin talks, Michael Glos, Germany's economics minister, warned that Russia's reputation as a gas supplier and Ukraine's reputation as a transit country were at stake.

In Brussels, a senior EC spokesman said: "Energy relations between the EU and its neighbors must be based on reliability and predictability and existing commitments to supply and transit must be honored in all circumstances. Disruption risks damaging the reputation of Russia and Ukraine as reliable suppliers."

The EU's gas coordination group, set up under a 2004 directive, comprises representatives from the 27 governments, commercial companies and transmission operators as well as European commission officials.

Officials from both Gazprom and Naftogaz have also been invited to attend, as the EU stepped up pressure on both to resolve their dispute.

The Czechs and the EC called the situation "completely unacceptable" as, "without warning and in clear contradiction with the reassurances given by the highest Russian and Ukrainian authorities," supplies had been substantially cut.