Can Ukraine's gas crisis spill over to Czech Republic?

Russia's decision to cut gas supplies to Ukraine this Sunday has caused concern in much of Central Europe. Most of the European Union's gas is supplied by Russia, much of it through pipelines that cross Ukraine. Poland, Hungary, and Austria have already registered drops in supplies. Slovakia says supplies are stable but pressure in the pipelines has decreased. The Czech Republic is one of few countries in Central Europe, which has not been affected so far. But for how long?

Gazprom office in Moscow, photo: CTK

Gazprom, the biggest natural gas extractor in the world, supplies about 25% of the European Union's gas. Most of it is supplied to Central European member states like the Czech Republic, as well as Germany, France, Italy, and Austria. Since Sunday's gas cut, Poland has registered a 14 % decrease in gas supplies and Hungary an alarming 25% drop. Slovakia's SPP, the company that transports the gas from Ukraine to the Czech-Slovak border, has also warned of a drop in pipeline pressure. But why has Ukraine's gas crisis spilled over to the European Union?

Eighty percent of Russia's gas that is headed for the EU is carried in pipelines that run through Ukraine. Gazprom has pledged to meet its commitment to its EU clients but says it cannot guarantee that all the gas will be delivered. It accuses Ukraine of stealing the gas that is on the way to the west. Ukraine also says it has the right to take 15% of the gas as "transportation costs" for allowing the pipelines to run through its territory.

The Czech Republic, which consumes an average of 9.6 billion cubic metres of natural gas a year, has not yet been affected by the row between Russia and Ukraine. The country's only provider of natural gas, RWE-Transgas, gets a little under a third from Norway; the rest is bought from Russia's Gazprom. Martin Chalupsky is the spokesman for RWE-Transgas:

"We don't think that the Czech Republic will be in a critical situation. Gazprom has proven to be a reliable partner and we've not had any serious problems with its gas supplies in the thirty years that we have been in business. Since Ukraine's gas cut, supplies to the Czech Republic have been according to contract. But should gas supplies to the Czech Republic be limited we have quite a large reserve. In the worst case, if all supplies from Russia are stopped, we can supply our consumers for six weeks."

Ukraine, a country which until recently was greatly influenced by Russia, enjoyed gas prices that were well below market price. Its supplies were cut off because it refused to accept Russia's raised rate from 50 to 230 US dollars per 1,000 cubic metres; a rate still lower than the 240 US dollar average that Gazprom gets from EU states. It is therefore unlikely that countries such as the Czech Republic will be faced with a massive unexpected price hike. However, to prepare for the worst, EU gas industry experts will meet in Brussels this Wednesday to discuss their next step.