Gas Crisis Freezes Economies in Balkans, Turkey
BALKANS, RUSSIA, UKRAINE (Dow Jones Newswires), Jan. 7, 2009
Southeastern Europe, already in the clutches of the global credit crunch, is likely to pay the highest price for the spat between Russia and Ukraine over gas deliveries.
Governments in the region have already shifted into emergency mode, cutting gas supplies to industrial firms and ordering utilities to shift to other fuels when possible.
"The Balkan region looks the worst affected," analysts at RBC said in a research note.
The risks were underscored Wednesday as regional currencies all fell against the euro. The Turkish lira dropped 3% while the Romanian leu, Polish zloty and Hungarian forint all fell more than 1%. Bulgaria's lev is tied to the euro through a currency board.
Russian halted natural gas deliveries to Europe via Ukraine Wednesday amid freezing winter temperatures, escalating a dispute with the government in Kiev over the pricing and alleged theft of gas from the transit pipeline.
Heavy reliance on Russian gas in Hungary and Slovakia will take a toll on businesses there. But the brunt of the crisis may be borne by Bulgaria, which is already running short of gas and is mulling austerity measures that may affect households during a harsh cold spell.
"The crisis has become unbearable and it really must end in a few days," Peter Dimitrov, Bulgaria's energy and economy minister, said Wednesday after informing 60 local companies of measures to restrict gas consumption that will go into effect Thursday.
Dimitrov said Bulgaria's heating utilities would switch to using oil later this week.
One Bulgarian in four relies on gas-fired central heating, which is in high demand amid nighttime temperatures as low as minus 16 degrees Celsius.
Moreover, shifting to electricity poses a risk of power outages as the country's grid comes under strain. Bulgaria remains a net exporter of electrical power but Dimitrov said rationing might be required if the gas blockade continues.
Russian gas supplies to Romania came to a halt Wednesday morning, prompting Economy Minister Adriean Videanu to declare a state of emergency in the energy sector. That will allow him to shepherd resources even though he said the country had gas reserves to cover the next two months.
Romania produces some of its own gas and has ample oil reserves, so won't cut supplies to industries unless temperatures plummet, the minister said.
Companies are being told to switch to other fuels and expect reduced gas supply elsewhere in Eastern Europe.
The industrial sectors of Hungary and Slovakia -- which declared its own state of emergency on Tuesday -- are notably reliant on gas and thus heavily exposed to the current cutoff, said Gyula Toth, an economist for UniCredit in Vienna.
But the smaller countries of Southeastern Europe are especially vulnerable because practically all of their gas imports come through Ukraine.
Bulgarian companies are losing 500 million lev, equal to EUR255 million, a day in business due to the gas cutoff, according to Evgeniy Ivanov, head of CEIBG, the country's main business lobby.
He predicted the energy crunch would lead to a raft of layoffs just as Bulgaria's economy slows in step with that of the euro area, its main trading partner.
Bulgarian President Georgi Parvanov reportedly told Viktor Yushchenko, his counterpart in Ukraine, that his country was the most disadvantaged nation because it has no alternatives and negligible reserves of its own.
Other Balkan states have no gas reserves at all, including Montenegro, Kosovo and Bosnia and Macedonia, but many of those countries rely on other fuels -- such as oil, electricity, wood and coal -- for power.
Croatia and Serbia are heavier users of natural gas but also have some held in storage. Still, Serbian authorities are talking with peers in Budapest about a possible loan of natural gas.
Turkey is holding up well, but has begun dipping into reserves, according to Energy Minister Hilmi Guler.
Gas supply along the country's western pipeline, through Ukraine, usually runs at 32 million cubic meters a day but has now been halted. However, Guler said Turkey expects to receive additional gas across the Blue Stream pipeline that links the country directly to Russia under the Black Sea.
Turkey is also increasing its gas intake from Azerbaijan and has been offered extra supply from Iran.
Turkey may well emerge a big winner of the dispute in the long term if the current crisis gives definitive impetus to the European Union's planned Nabucco pipeline from the Caspian region to Eastern Europe by way of Turkey.
However, that project is hotly disputed by Russia, which is keen to support the rival South Stream pipeline from Russia to Bulgaria under the Black Sea, a joint project of Gazprom OAO (OGZPY) and Italy's Eni SpA (E).
(Margit Feher in Budapest contributed to this report.)
Copyright (c) 2008 Dow Jones & Company, Inc.
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