History`s Weight Felt In Europe Natgas Crisis Fall

A politically charged dispute between Ukraine and Russia over price led to a shutdown of gas supplies to Europe for much of January.

Europe's recent natural gas crisis brought back memories of the Cold War at a major U.S. energy conference this week, even though industry leaders hope to move on from the past as they fear for future supplies.

A politically charged dispute between Ukraine and Russia over price led to a shutdown of gas supplies to Europe for much of January, adding heat to a debate over where the continent should get its gas from, and how.

Gerhard Schroeder, a former German chancellor now helping to lead an effort to get a new pipeline from Russia built, said solving tough international issues such as energy security meant abandoning the unilateral approach of recent years.

"The Cold War era is over for good -- and both sides would be well advised not to attempt to keep it alive, either in rhetoric or policy," Schroeder told the CERAWeek conference in Houston.

Schroeder saw the chances of more cooperation between the European Union, Russia and the United States as "not bad" with U.S. President Barack Obama in the White House. "He now represents a United States of America that people like," Schroeder said.

A sense of historical bias over the gas crisis was also cited by Rainer Seele, chairman of German-Russian joint venture Wingas <BASF.DE>, who like Schroeder works in the Gazprom-led <GAZP.MM> consortium seeking to build the Nord Stream pipeline across the Baltic Sea.

"Simply accusing Russia exclusively has got something to do with an anti-Russian attitude ... I think that's wrong," Seele told the conference, after being introduced as someone who was at the Kremlin for the gas talks between Ukraine and Russia.

But Laszlo Varro, strategy director at Hungarian oil and gas company MOL <MOLB.BU>, saw little value in assigning blame for a shutdown that left hundreds of thousands of people without heating in the middle of winter.

"I think that's beside the point," he said at the conference in Houston. "The outcome was clearly unacceptable."

Having grown up under communism, Varro said he was struck by how the extensive pipeline network that helped keep gas flowing in Western Europe contrasted with the largely east-west pipelines on the other side of the former "Iron Curtain.

Varro also did not disguise his skepticism about the 10-year gas supply agreement just signed between Ukraine and Russia, saying he would be happy if it lasted 10 months. "But I would not be surprised if it was 10 weeks," he added.

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Few doubt that Europe needs Russian gas and that Russia needs Europe to buy it. Russia has a quarter of the world's gas reserves, and Europe is expected to have to import 80 percent of its gas by 2020 as supplies from the North Sea decline.

Mark Gyetvay, chief financial officer at Novatek <NVTK.MM> <NVTKq.L>, Russia's largest independent gas supplier, also disputed the Western portrayal of Russia as the 'big bear' shutting off the pipeline to Europe.

He argued a financial cost of the dispute can be seen in the 7.9 billion-euro pipeline of Nabucco, a multi-country effort to bring Caspian-area gas to Europe via Turkey.

"If you had normalized diplomatic relations and normal business practices, I don't think you'd need this," he told Reuters, referring to Nabucco's pipeline.

Schroeder said another problem for Nabucco was finding a reliable gas source, with Iran at or near the top of the list.

But MOL is among those backing Nabucco, and Varro said it was even more vital to provide an alternative to Russian gas after last month's crisis -- the impact of which he compared to way the U.S. mind-set changed after the 2001 terrorist attacks.

"On the 12th of September, nobody could claim that the events of September 11 were not possible," he told the conference.

Didier Holleaux, GDF Suez's <GSZ.PA> vice president of exploration and production, had a more light-hearted metaphor for the crisis, comparing it to how turkeys have a reasonable expectation of being fed -- right up until Thanksgiving.