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Russia-Ukraine gas dispute hits supplies to Balkans

Russia's row with Ukraine slashed gas flows to Greece by a third and reduced supplies to Bulgaria and Croatia on Monday, placing Moscow's reputation as a reliable gas supplier to Europe under new scrutiny.

Russian gas monopoly Gazprom cut off gas supplies to Ukraine on January 1 in a dispute over debts and pricing that shows no sign of ending, worrying European consumers that depend on Russia for a quarter of their natural gas.

“The situation is worrying when someone is unable to fulfill their contract,” Dimitar Gogov, chief executive of Bulgarian state gas monopoly Bulgargaz, told Reuters. His country saw 10%-15% drop in natural gas supplies from Russia.

Gazprom Chief Executive Alexei Miller will meet Russian Prime Minister Vladimir Putin on Monday for talks on the dispute, a government spokeswoman said. The company said Ukraine had shut down a station supplying gas to the Balkans.

The European Union has called an emergency meeting of envoys on Monday in Brussels. Gazprom's deputy chief executive, Alexander Medvedev, is also in Paris for talks.

Moscow, long at odds with Ukraine over its neighbour's ambition to join NATO, has accused Kiev of stealing gas intended for Europe, but Ukraine has alleged Russia was cutting flows by more than half through a key export pipeline.

A similar gas row briefly disrupted supplies to Europe three years ago. That crisis prompted calls for the European Union to diversify its energy supplies, but it has struggled to break its reliance on Russia.

Greek natural gas operator DEPA said it would receive only 4 million cubic meters of gas from Russia daily compared with its request for 6 million, although it would cover the shortfall from other suppliers.

Croatia, which imports 40% of its annual gas needs, most of it from Russia, also followed the Czech Republic, Turkey, Poland, Hungary, Romania and Bulgaria in saying deliveries had been affected by the row.

“Imports of Russian gas have been reduced by 7%,” Ivana Markovic, a senior official with Croatian pipeline firm Plinacro, told state television.

Worries about the impact of the row on fuel supplies, coupled with the conflict in the Middle East, helped drive oil prices to a three-week high. Any gas shortages could drive up demand for oil products.

Gazprom said in a statement Ukraine had sent a letter threatening to “confiscate transit,” accusing Kiev of taking 25 million cubic meters of gas destined for European countries between January 3 and January 4.

“At the same time it has shut down the Orlovka Compressor Station which supplies gas to the Balkans,” Gazprom said, without naming volumes. Ukrainian state energy company Naftogaz was not immediately available for comment.

Bulgargaz CEO Gogov said Russian gas transit volumes via Bulgaria to Turkey, Greece and Macedonia were lower. “All Balkan countries are affected,” he said.

Supplies to Romania were 30% lower than contracted levels and the cuts could continue until January 11, Ioan Rusu, director of Romanian state-controlled pipeline operator Transgaz said.

Gas supplies to the Czech Republic, however, were back to normal after suffering a 5% drop on Sunday, said Martin Chalupsky, spokesman for the country's main supplier, RWE Transgas.

Gazprom said it was honoring its commitments to customers and was supplying additional gas through Belarus and the Blue Stream pipeline as well as from its reserves in European underground storage.

Turkey had raised supplies of Russian gas via the Blue Stream pipeline under the Black Sea to compensate for a slight decline in supplies via Ukraine, its Energy Ministry said.

Pressure on Hungary's natural gas pipeline, which ships Russian gas via Ukraine, remained below the contracted level on Sunday but gas shipments are in line with contracted volumes.

With no negotiations in sight, both Russia and Ukraine have said they would bring cases against each other in a Stockholm arbitration court that deals with international commercial disputes. (Reuters)