Russia-Ukraine Gas Crisis Intensifies As All European Supplies Are Cut Off

Gazprom, the state-owned Russian gas group, today cut off all supplies to Europe traveling through Ukrainian pipelines, intensifying the political and economic crisis that has arisen out of a payments dispute between the two countries.

Amid evidence that people in eastern Europe are being deprived of heating as the Arctic cold snap continues, Russia and Ukraine continued to blame each other for the deadlock.

Gazprom accused Ukraine of shutting down the fourth and last open pipeline crossing the country while officials at Naftogaz, Ukraine's state energy firm, simply said: "Words fail us."

The complete shutdown comes ahead of top-level talks in Moscow tomorrow between Gazprom and Naftogaz executives to resolve a pricing dispute that has arisen in each of the last four years. Ukraine, semi-bankrupt and being bailed out by the IMF and EU, is being offered natural gas at higher prices, but substantially below those charged on European markets.

The dispute, viewed by the EU as a purely commercial one until recently, threatens a fresh breakdown in relations between Brussels and Moscow, with European Commission officials warning that Russia's reputation as a reliable partner is once again at stake.

But analysts point out that, since the last serious crisis broke out in 2006, Europe has done very little to avert shortages. Instead of creating an integrated market, drawing on alternative energy supplies, countries have simply drawn up individual contracts with Gazprom, increasing dependence on Russia.

Russia supplies a quarter of Europe's gas and 80% of this transits through Ukraine. As shortages hit western Europe and intensify in the south and east, EU governments will meet on Friday to consider sharing supplies held in storage.