And while it might seem like a strange turn up for the books that western capitalism’s former biggest enemy is now largely responsible for the ability of many of us Europeans to cook and heat our houses, Russia holds 17% of the world’s gas reserves. Russian gas giant Gazprom, which recently acquired a license to enter the €2 billion Irish gas market, supplies a quarter of Europe’s gas needs through Ukraine and Belarus, with about 80% of Russia’s gas exports going through Ukraine.

The Ukrainian move, which was later resolved, sparked fears of a repeat of the January 2006 gas crisis. Back then, the Russian behemoth briefly shut off the flow of gas to Ukraine — a key route in the supply of Russian gas to Europe after which supplies to Europe were curtailed and gas prices increased. But security of supply is also a key issue for Ireland given our dependency on imported gas. Despite the presence of the Kinsale Head gas field, currently Ireland imports about 95% of its 4.6 billion cubic meters (bcm) per annum gas needs.

In addition, we have little or no gas storage, unlike many countries in the rest of Europe, like France or Britain. And although offshore Irish projects are coming on stream in the future, the energy regulator CER estimates that even with the likes of Corrib, scheduled to start producing in 2009, we will still need to import about 60% of demand. The Shannon liquefied natural gas (LNG) €500 million development in Co Kerry is still being heard by An Bord Pleanala. According to Gerry Hennigan, analyst at Goodbody Stockbrokers, the security of gas supply to Ireland is going to become more and more of an issue going forward. “We are at the end of the supply chain. And we do not have any gas storage. Recently we have been protected to an extent by mild winters but there are no guarantees,” said Hennigan.

In many ways, historically, Ireland’s gas storage was the Kinsale field. But Ireland’s off-shore reserves are depleting, with Kinsale due to run out in five to six years. The timing of Gazprom’s threat to reduce supplies to Ukraine unless debts were repaid, says as much about the company’s political muscle as it did about its economic aims and its ability to potentially effect European gas supplies. It came as the votes of Ukraine’s parliamentary elections were still being counted and amid the country’s newly revived ambitions to join NATO. In addition, many observers felt that it also may have had the intention of quashing any thoughts that Ukraine might host American missile-defense installations. But it also came as Gazprom is putting pressure on a number of former Soviet states to pay gas prices at European levels. These had traditionally been subsidized, due to historical links with what was the Soviet empire. And as incongruous as it might seem, all of these issues are interlinked, according to analysts.

“If you’re discussing Europe’s vulnerability to gas supplies from Russia, you should also consider Gazprom’s dependency on countries, that gas is supplied through, like Ukraine and Belarus,” said Konstantin Butanin, an analyst with Alfa Bank in Moscow. “These countries can use this as bargaining power. In my opinion, some countries have blamed Gazprom for curbing democracy and oppression but the company has been trying to achieve growth and improve its profitability,” said Butanin. “It is up to these countries to focus on economic growth and adjust to higher gas prices. In about three years’ time, gas prices will be synchronized.” He added that, when it comes to Gazprom and Europe, there is also an interdependence. “It is as important for Gazprom to sell gas to Europe as it is for Europe to consume it.”

According to Lars Christensen, a senior analyst with Danske Bank, the economic argument, from Gazprom’s point of view, is that free market gas prices should prevail. However, he added that there is also the point that continued tensions still exist with former Soviet states especially, when Gazprom is trying to increase fuel prices. “You don’t see the same tensions with Bulgaria, where relations between the two countries are significantly better.” But he also pointed out the importance of the European market to Gazprom from a purely economic perspective. “We may continue to see flare ups (like the recent threats in relation to Ukraine) but I don’t think we’ll have a repeat of 2006. It’s very hard to imagine Europe being independent of Russian gas considering its importance as an export for the country,” said Christensen. It is also hard to ignore the growing speculation that current Russian president, Vladimir Putin, will take over as chairman of Gazprom after he steps down in May.

Putin’s name is believed to have been among 42 applications submitted for the post — with few observers doubting his candidacy would outshine all others. The appointment would cement Putin’s huge political influence beyond his presidency. The chairmanship is currently filled by Dmitry Medvedev, the longtime friend that Putin has chosen to replace him when he formally steps down in May. Whatever form the changing of the guard takes, diversions from the current method of importing natural gas into Europe, mainly from Russia, are being explored.

The Nabucco pipeline is a planned natural gas system that will transport natural gas from Turkey to Austria, via Bulgaria, Romania and Hungary. It will run from Erzurum in Turkey to Baumgarten an der March, which is a major natural gas hub located in Austria. And another area that’s being further explored by Europe as an alternative to Russian gas is north Africa. “In the context of fears for security of future gas supply into Europe, north African gas reserves — and crucially access to those reserves — are likely to become increasingly important,” said Job Langbroek, resource analyst at Davy Research. (Independent.ie, Irland)