October 1, 2014 / 3:18 PM / 3 years ago

UPDATE 2-EU-Russia gas duel deepens with Slovakia supply cut

* Slovak PM says gas a weapon in political fight

* Czech supplies reduced for the first time

* Winter gas year begins on Oct. 1

* EU needs to secure supplies for coldest months (Adds Czech reduction para 7, deal talks para 25)

By Michael Kahn and Jan Lopatka

PRAGUE, Oct 1 (Reuters) - The cat and mouse game between Europe and Russia on gas intensified on Wednesday with Slovakia saying its supply from Russia was down by a half and its prime minister calling the move part of a political fight.

Since September, Russia’s state-controlled Gazprom has sent less-than-requested deliveries to Poland, Slovakia, Austria and Hungary - after the European Union began sending gas to Ukraine - in a clear warning from Moscow ahead of the winter heating season which officially starts today, when the industry switches to higher pricing.

The 50 percent cut reported by Slovakia, a major transit point for Russian gas exports to Europe, was by far the deepest yet, and Prime Minister Robert Fico said he would call a crisis meeting of his government if the problems persisted.

Fico, who normally has warm relations with Russia and has criticised EU sanctions against it, said he saw political factors behind the cuts.

“The Russian side talks about technical problems, about the necessity of filling up storage for the winter season,” Fico said. “I have used this expression and I will use it again: gas has become a tool in a political fight.”

There was no immediate comment from Russian gas exporter Gazprom

Slovakia’s western neighbour the Czech Republic became the latest former Soviet-bloc nation to experience reductions. RWE Czech Republic, its main gas importer, said it saw unspecified reductions on several days over the past week, although the flow seemed normal on Wednesday.

It was unlikely there will be any impact for now on consumers of gas in the Czech Republic, Slovakia, or the countries further West that receive it via there, because gas storage reservoirs throughout Europe are close to full.

As well as shipping Russian gas west, Slovakia also sends it east into Ukraine. That has irked Russia, which switched off gas deliveries to Ukraine to persuade Kiev to pay its arrears.

“Nobody should be surprised by what Russia does. They want to keep pressure on Ukraine... at the start of the heating season,” said Michael LaBelle, a gas expert at the Central European University in Budapest.

Central European spot gas markets rose to over 25 euros ($31.52) per megawatt-hours (MWh), their highest levels since the Ukraine crisis broke out in February/March.

Russia is Europe’s biggest supplier of natural gas, meeting almost a third of annual demand and in return, Gazprom receives around $80 billion in annual revenues from its European customers, making up the majority of its income.

Moscow halted gas flows to Ukraine three times in the past decade, in 2006, 2009 and since June this year, although this year gas for the EU via Ukraine has so far continued to flow.

Opening up gas flows eastward was part of the EU’s response to Gazprom’s decision to cut supplies to Kiev in June. Slovakia, Poland and Hungary can also send gas to Ukraine but so far deliveries have not been without incident.

Poland temporarily stopped deliveries to Ukraine last month after Warsaw said it was getting less gas from Russia than requested. Hungary stopped eastward supplies last week in order to fill its own storage tanks ahead of winter.

Slovakia, with the largest EU capacity to Ukraine, had maintained deliveries.

Analysts agree the moves are a warning to Europe that Russia is ready to retaliate should Brussels impose further sanctions on Moscow over its intervention in Ukraine.

“It (the Russian export reductions) could actually be in the end quite harmless. But the fact that they did not tell anyone in advance, (shows) that nobody should trust any explanation he or she gets, and that in itself is damning,” Czech energy security ambassador Vaclav Bartuska told Reuters this week.

He added it would be foolish to expect gas to flow as usual through Ukraine this winter.

DEAL?

Traders have, however, pointed out that Russia’s recent reductions to Europe, at least before the latest cuts to Slovakia, were within contractual allowances and came during times that EU gas storage tanks are well filled.

Gas Infrastructure Europe data show that the EU’s gas storage sites are filled to an average of over 90 percent, compared to just 68 percent this time last year.

“Most of the EU has its gas tanks filled to the rims, so they don’t need more gas at the moment, while Gazprom needs to still fill its domestic reserves ahead of the Russian winter, so I‘m not surprised by its flow reductions to the EU, which were all within contractual allowances,” one EU utility trader said.

While gas deliveries to Germany, Gazprom’s biggest customer, should continue through the Nord Stream pipeline which bypasses Ukraine, the outlook is far less certain for central and southeastern European nations which receive most or all of their imports from Russia and via Ukraine.

To deal with a potential shortfall this winter, the European Union has prepared emergency plans and has also sought a compromise to safeguard winter supplies in a potential deal that would guarantee Kiev at least 5 billion cubic metres of Russian gas for the next six months if Ukraine made pre-payments.

The Russian energy ministry said on Wednesday that there would be not further gas talks with Ukraine and the European Commission this week. (1 US dollar = 0.7933 euro) (Additional reporting by Vera Eckert in Berlin; Writing by Henning Gloystein and Christian Lowe; Editing by William Hardy)

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