Q&A: Why Europe needs Russian gas
The threat from Russian state monopoly Gazprom to cut off the gas flow to one of its neighbours, Ukraine, has again raised questions about the security of Europe's energy supply.

Why is this a worry for European countries?

Gazprom controls about a third of the world's gas reserves and it is responsible for a quarter of Europe's supplies. Most of Europe's gas is piped via Ukraine, and when Gazprom shut down the pipeline in 2006, the flow to the rest of Europe fell, in some areas, by 40%.

Is the latest deal between the two presidents the end of the matter?

For the moment, yes. President Putin has said that Gazprom is satisfied with Kiev's commitment to begin paying its bills. Gazprom says Ukraine amassed debts of $1.5bn since November 2007, while Kiev argues the figure is closer to $1bn.

But it is the way payments are made that is at the heart of the dispute and that may not have been resolved. The debt is owed not to Gazprom but a subsidiary RosUkrEnergo, part-owned by two Ukrainian businessmen.

Ukrainian Prime Minister Yulia Tymoshenko wants an end to the system that allows RosUkrEnergo to import the gas and another intermediary, UkrGasEnergo, to sell it. Gazprom says it is prepared to negotiate once the bills are paid.

Is this politics or economics?

Analysts in Moscow say it is all about cash, and Western Europe has dramatised it as a political dispute. But Europeans are edgy. It seemed odd that the threatened cut-off coincided with a rare visit to Moscow by Ukrainian President Viktor Yushchenko. Ukraine's ambition to join Nato was as high on the agenda as the Gazprom crisis.

Is Moscow doing anything to secure Europe's supply?

Gazprom has embarked on plans for pipelines that bypass Ukraine and Belarus, former Soviet states which are currently essential for transit.

Gazprom has two major projects, Nord Stream and South Stream. Nord Stream will run for 1200km along the bed of the Baltic Sea, and South Stream under the Black Sea. Gazprom has signed up big European partners: Italy's ENI for South Stream, and German companies E.ON Ruhrgas and Wintershall - along with Dutch provider Gasunie - for Nord Stream.

Is the EU happy about relying on Russian gas?

The EU has major concerns about security of supply and is moving ahead with a pipeline plan of its own. Nabucco will bring gas from Central Asia and the Caspian across Turkey into the European Union. But it will have only enough capacity to provide a small proportion, perhaps 5%, of Europe's needs.

So Europe needs Gazprom, and that is why European companies and their governments have actively embraced the two projects. Austria is likely to serve as a hub for both. EU officials say that even during the Cold War the Russian gas supply was stable, so it is better to rely on Gazprom than potentially unstable sources such as Turkmenistan and Uzbekistan.

dw

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