germany: January 20, 2009

Recent developments concerning Russia’s decision to cut off the flow of natural gas to Europe increasingly shows how energy supplies can be used as a weapon. Russia has shown ambitions to block plans to bring gas from Central Asia into the EU. Additionally, Russia is devising a plan to avoid currently unfriendly transit countries. The North Stream and South Stream pipelines under the Baltic and Black Seas are part of this strategy. Under this plan, Russia could disrupt supply to traditional transit countries without impacting gas shipments to Western Europe.

Recently, Russia announced that it would resume shipments to European countries through its network located in the Ukraine. However, the recent spat between Russia and the Ukraine has only highlighted the sense of urgency among EU members to seek ways to reduce their gas dependence from Russia.

The resumption of service only became possible after the Ukraine backed down in its attempts to add an addendum to the deal which wanted an acknowledgment that it did not owe any additional payments to Russia. The EU, Russia and the Ukraine have also agreed to monitors in the Ukraine to ensure no gas supplies are siphoned off. While all parties seem to be in agreement on the resumption of gas service to Western Europe, other problems exist including the price of gas paid by the Ukraine, late fees which Russia feels it is due, the use of technical gas to operate the pipelines, and transit fees the Ukraine feels it is owed by Russia.

In all the gas cut-off by Russia has affected at least 20 European countries with the Balkans being hardest hit.