CEE FOCUS
Quarterly Publication of Constellation Energy Institute

-- Summary --

Gazprom stopped the supply of natural gas to Ukraine on January 1, 2009.

Gazprom stopped gas deliveries to Ukraine on January 1, 2009 due to alleged debt arrears and disagreement on the price of natural gas and transit rate for 2009. On January 6 and 7, the Russian gas monopoly stopped supplying gas via Ukraine entirely thus stopping Russian gas deliveries to about a dozen countries. Central Eastern Europe was hit hardest by the gas curtailment. Countries of the region made up the reduced quantities by releasing gas from storage, increasing domestic gas production, receiving gas loans from other countries and reducing the gas usage of major industries, thus causing serious harm to their economies. See details on page 5.

The CEE coalition reaches success in the EU energy/climate talks.

The European Council accepted the Energy-Climate package on December 12, and the European Parliament voted for it five days later. The decision took into consideration the initiatives of a coalition of Central Eastern European countries (the Czech Republic, Slovakia, Hungary, Lithuania, Latvia, Estonia, Bulgaria and Romania) led by Poland aiming to weaken the CO2 emission rulings, which had threatened their coal-based economies. According to the original plan of the European Commission, every EU member country would have to purchase 100 percent of the CO2 emission permits at auctions starting from 2013. The final agreement specifies that trade in 100% of CO2 emissions allowances will start in 2020 as opposed to 2013, with 70% of allowances continuing to be freely allocated until then. See details on page 9.

Serbian oil industry sold to Gazprom.

Serbia and Russia signed an agreement on the sale of the Serbian Oil Industry, NIS, the transit of the South Stream gas pipeline through Serbia and the construction of the underground gas storage facility in Banatski Dvor in Moscow on December 24, 2008. 51% of NIS was sold for €400 million to Gazpromneft which is obliged to invest a further at least €547 million in the Serbian company, as compared to a valuation by Deloitte and Touche of €2.2 billion for 100% of NIS's equity. The agreement on South Stream envisages a Gazprom majority stake in the joint project and gives the Russian side the right to negotiate the capacities of the pipeline planned to be at least 10 billion cubic meters annually. Talks with Slovenia on the extension of South Stream are also expected to resume in January. See details on page 10.

Energy was made a priority of the Czech EU Presidency.

The Czech Presidency of the EU made sustainable and safe development of energy industry a priority. The energy-related plan of the Czech Presidency relies on three pillars: guaranteeing energy security, improving the operation of the internal gas and electricity markets and increasing energy efficiency. See details on page 12.

LETTER OF THE EDITOR.

See details on page 2.

EDITORIAL: What the new US administration will mean for energy in Central Eastern Europe?

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SHORT NEWS

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WHAT TO WATCH?

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