In the course of the conversation, Schmidt mentioned that Germany had just signed gas-supply contracts that meant 14% of its daily needs would come from Russia. Lord Howell, then UK energy secretary and present at the dinner, remembers Thatcher’s horrified reaction.

She put down her coffee cup with a clatter. “Helmut, this is very dangerous,” she said. Schmidt puffed on his pipe, Howell recalls, and tried to reassure her. The Russians needed to sell the gas and, in any event, Austria’s reliance on imports was already much higher.

Thatcher was not convinced, and made a point of telling Howell he should ensure Britain was never put in such a position.

Schmidt’s successors must wish he had heeded Thatcher’s advice. Last week’s spat between Russia and Ukraine over gas supplies underlined the Continent’s reliance on Russian exports. Germany now depends on Russia for 30% of its gas. Western Europe draws one quarter of its supply from the same source.

When Russia turned off the tap to Ukraine last week, the Ukrainians diverted gas that was supposed to head further west — the pipelines cross its territory — meaning fearful shivers were felt in Berlin and Rome as well as Kiev. The potential disruption of supplies to the heart of the EU was severely embarrassing to Russia, and helped force the hasty peace deal on Wednesday in which Ukraine agreed to pay a higher price for its gas.

Thanks to Britain’s North Sea riches, Thatcher and her successors had little fear of the Russian bear. Now that happy feeling of security has gone. Domestic production is in rapid decline, and this year for the first time Britain has been a net importer of gas, something that was unthinkable in the heyday of North Sea production. Within 15 years, according to energy minister Malcom Wicks, 80% of Britain’s gas needs will be met by imports.

But, thanks to a fine balance between supply and demand, small reserves and Britain’s open energy markets, the gas crunch could come sooner than expected — perhaps, if the weather turns nasty, as soon as the next few weeks.

British production has tailed off so quickly, and our reserves are so slim, that a serious cold spell could spark cuts in supply to industrial users. Gas prices are already so high that some industrial users have voluntarily curtailed production — Terra Nitrogen, for example, closed its Teesside ammonia plant indefinitely in November.

Experts said cuts in supply to domestic users are unlikely, but, if the cold weather lasted for several weeks into February, supplies to gas-fired power stations could be hit, leaving the public facing power cuts or “brownouts”, where the voltage of domestic power supplies is reduced.

The government has played down the risks, but British energy policy is now rapidly being reviewed. Tony Blair announced the policy revamp in November, two years after the publication of the government’s previous energy white paper.

Whitehall sources said the new policy is likely to be rushed out by the middle of the year, and will stress the need for measures to ensure security of supply, and may include the go-ahead for the construction of nuclear power stations.

Energy experts said the Ukraine row has highlighted Britain’s need to act. “The Russian situation has definitely been a wake-up call for Europe and for Britain,” said Berthold Hannes, energy expert at the consultancy AT Kearney. “The UK does not rely on imports right now, but it will do in the future. It is very short-sighted to think that because Russia sent gas during the cold war, it always will. Then they had military power, now they have energy power.”

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Complete article The Times
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