Europe less exposed to any Russian gas cut

Europe may be consuming more Russian natural gas, but it is less exposed to a possible cut of supplies through Ukraine thanks to new pipelines and an exceptionally warm winter. Russia's intervention in the Ukraine crisis has raised concerns of a cut in supplies as most of the exports by Russian gas giant Gazprom flow through the former Soviet state. Price disputes in 2006 and 2009 between state-controlled Gazprom and Ukraine led to severe cuts in supplies during the dead of winter in many eastern European countries which are nearly completely dependent on Russian gas, leaving apartments cold and shuttering factories. This year however any cut in supplies would be coming at the onset of warmer weather, and Europe has had its mildest winter in six years, reducing demand for gas. On Monday, gas storage facilities were 48.8 percent full, compared to around 37 percent at the same time last year, according to Gas Infrastructure Europe (GIE), the association of pipeline operators in European countries. That is enough for about six weeks of consumption, according to experts. And less Russian gas now flows through Ukraine, which has had chronic problems in paying Gazprom and is regularly at loggerheads over prices. Previously around three-quarters of the Russian gas flowed through pipelines that cross Ukraine. This has now fallen to around half following the opening in 2011 of Nord Stream, a pipeline which takes natural gas from near Saint Petersburg to Germany under the Baltic Sea. Russian gas supplies via Ukraine now account for about 15 percent of total consumption in Europe. The construction of Nord Stream was controversial over environmental concerns and for reinforcing dependence on Russia, but its operation means Germany is not worried about supplies. "Gas reserves are quite full," a German Economy Ministry spokeswoman said. "We are well prepared for any potential supply problems." - Cuts would hurt Russia - The French industry is also unfazed about a cut in supplies. "We don't think that the Russians are going to do that" said one source. Experts agree. "Potential short-term gas supply disruption to Europe will drive continued market volatility in coming weeks, but protracted cuts would be too damaging for Russia to sustain," said gas analyst Leslie Palti-Guzman at Eurasia Group. She said a cut would likely only come in the case of a conflict spreading throughout eastern Ukraine, but noted a long-drawn crisis would not only hurt Russia's finances in the short term but in the longer term as European countries would likely push forward with plans to diversify their supplies. While Europe is dependent on Russia for gas, "Russia is also dependent on Europe, because a major part of its revenues come from these deliveries," said Claudia Kemfert, a German energy specialist. In 2012, 57 percent of Russia's gas exports go to Western Europe, 24 percent to Eastern Europe, and 19 percent to Turkey, according to information from the US government's Energy Information Administration, although Moscow aims to sell gas to Asia. Ukraine also has an interest in keeping the gas flowing as it receives transit payments. However if Russia cuts deliveries to Ukraine over payment disputes, Kiev could be tempted to consume supplies meant for Europe. In a sign of continued tensions, Gazprom on Tuesday said it would end in April a price discount that had just been granted to Ukraine, but offer Kiev a loan of up to $3 billion to cover its debt. On Saturday, Gazprom said Ukraine owes it a debt of $1.55 billion for unpaid gas. Moscow has been frequently accused of using its gas exporting monopoly as a diplomatic weapon aimed at influencing decisions of ex-Soviet nations that rely on Russian gas and contemplate closer relations with the West. A cut in supplies via Ukraine would hit central and southern European countries hardest, as most depend for much if not nearly all of their gas via pipelines which pass through the country. Russia has been trying to reduce its dependence, as well as that of these countries on Ukrainian transit routes, and has launched construction of the South Stream pipeline which carry supplies under the Black Sea to Bulgaria and then spread throughout the region.