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EUROPE: Caught in Freezing Crossfire

Zoltán Dujisin

BUDAPEST, Jan 10 2009 (IPS) - Central Europe and the Balkans face a halting of industrial production, closed schools, frozen water supply pipes and eventual economic paralysis as suspension of gas deliveries stops life in the region.

After struggling to cope with the consequences of a financial crisis caused by the West, another economic blow may now come from the East.

Deliveries were interrupted after Russia and Ukraine failed to reach an agreement on the price for gas in 2009, and over Ukraine’s failure to pay fines for late payments.

The interruption of gas transit though Ukraine, which transports 80 percent of Russian gas to Europe, has left countries like Bosnia, the Czech Republic, Slovakia, Hungary, Bulgaria, Croatia, Macedonia, Serbia and Greece in a very tight spot.

Hungarian Prime Minister Ferenc Gyurcsány said this week it was unacceptable that “the bullets Ukraine and Russia shoot at each other hit Hungary.” Like other affected countries, has set up gas usage limits for consumers.

Eastern Europe has not seen such rationing since communist times. In Hungary schools were closed down during the week. Officials say they will compensate by sending children to school on weekends.


The Hungarian Ministry of Agriculture has handed out a list of food companies producing essential goods such as meat, milk and bread, and asked the government to ensure uninterrupted gas supplies.

Hungary has capacity to sustain some two months of heating public institutions and houses, 90 percent of which use gas, but only if it abandons all economic activity.

Some producers are closing down their factories in face of government restrictions. Farmers fear their poultry and cattle will freeze to death, and middle-size companies are worried about their output.

“We have already been affected by one of our factories only receiving half the amount of needed gas,” Gabor Torok, a manager at a middle-sized pharmaceutical company told IPS. “If the situation prolongs, it can have an effect on us because gas influences production itself; some machineries don’t get enough of it and they cannot perform their tasks, which affects both the quantity and quality of our products.”

Big industrial players have been the first victims of the gas spat, and some have stopped activities. Car manufacturers, key to many central European economies, might close down, causing enormous damage to the countries’ economies.

While the Czech Republic and Hungary have small gas reserves to rely on, other countries in the region are grappling with a dramatic situation.

Slovakia has declared a state of emergency. Finance minister Lubomir Jahnatek has warned that unless gas supplies are restored in the next ten days, the energy supply system will collapse and the country will have to brace itself for a complete blackout.

Most electric energy in Slovakia is generated by gas, leading state officials to speculate about the possibility of reactivating old nuclear plants, in violation of EU rules.

But the crisis has also allowed for some noble gestures: Moldovan President Vladimir Voronin, who similarly to Bulgaria has begun receiving small emergency supplies from Ukrainian gas reserves, is offering energy to the Dniester region, a rebel entity that considers itself independent from Moldova but whose social institutions and hospitals are at risk.

Moldova proper, Ukraine’s south-western neighbour, is itself in one of the most serious situations in Europe. “People in apartments supplied by the city hall have no hot water, and the heating is very low, just enough to keep the pipes from freezing,” Corina Cepoi, a Moldovan speaking from capital Chisinau told IPS.

“This is affecting mostly children and the elderly, it’s really cold in the houses and people are dressing the same way they dress outside, while using electric heaters,” she says. “In the shops electric appliances are sold like hot bread.”

In Serbia, Bosnia and Macedonia plants operating on gas have either halted electricity production or are switching to oil derivatives, as inhabitants struggle with minimal or no heating in their homes.

After 80,000 inhabitants in Novi Sad in northern Serbia were left without central heating last Tuesday, Hungary agreed to a gas loan in spite of its own difficulties with supplies. Serbia has also secured additional loans from Germany and Austria.

Later Bosnia and Croatia also managed to secure gas loans from Hungary and Germany, although in the event of worsening conditions Hungary says it will interrupt deliveries to the Balkans.

Even if Ukraine and Russia normalise the supply of gas, it will take several days for the Balkans and Central European gas distribution systems to be fully effective again.

The affected states may consider demanding compensation from Gazprom or Ukraine. Hungarian energy supplier Emfesz Kft has already announced it is suing the Ukrainian national gas and oil company Naftohaz Ukrayiny.

Czech Prime Minister Mirek Topolanek, whose country holds the European Union (EU) rotating presidency, is in Russia for talks with Russian Prime Minister Vladimir Putin, and has promised not to leave the region until the gas supply is restored.

Russia and Ukraine have agreed to let in a team of independent EU monitors to help end the standoff, but Putin says Ukraine has aggravated the crisis further by its refusal to agree to a price for 2009, giving little hope of a quick resolution.

 
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