Gas Yalta on the horizon

Czy ukraińskie gazociągi zaczną wybuchać? Dzisiaj doszło do kolejnej  eksplozji koło Użhorodu
Ukrainian gas transit system.

17.06.2014 – During the talk with Russia- 24, the CEO of Gazprom, Alexey Miller, stated that due the Ukrainian failure to fulfill the obligations that ensue from the clause ‘take or pay,’ his company could ask the International Court of Arbitration for a fine of up to $18 bn. If Ukraine fails to pay its debts – it will not get the raw material from Russians. It will then use the supplies from its magazines. If they are emptied until the winter, the transit to European clients will be in question. What then? Gazprom has already come forth with a proposal.

Ukraine drew and paid for the Russian gas less than it was contracted in the clause, which forces to pay for a certain volume regardless of whether it was received or not. Adding up to this is the $4,5 bn of debt for the gas received by Kiev. The Ukrainian Naftogaz also filed a complaint, priced for $6bn, to the arbitrage for the unfair price of gas deliveries from Russia.

Read also: The Polish trace in the nascent Energy Community 

Alexey Miller declared that Gazprom could invest in the development of storage abilities in Europe in order to secure deliveries even in case of emptying the Ukrainian storages. It has already taken over the German Wingas, due to which it gained influence over the German gas magazines. It is possible to assume that the RFN region will be where the objects, which Miller talks about, are going to be built. Due to the enlargement of the German magazines’ capacity (currently 12bn m3) to match the Ukrainian one (these objects are the biggest ones in Europe, 32 bn m3 of capacity), Russians could use Nord Stream, OPAL and NEL to transit gas to Europe, and stop the transit through Ukraine. This move would be a logical result of Russians’ current efforts for the full exclusion of these pipelines from the regime of the EU’s third energy package, which forbids a single supplier to have total control over the capacities of pipes. Russian plans might be thwarted by German politicians, who (first in Bavaria, and later in federal institutions) signaled concerns about the German gas reserves that, in case of Russians taking over the control of the magazines, could become a part of their game. That is why they are appealing to create independent German reserves and keep the control over the magazines. If the Ukrainian crisis doesn’t open the eyes of Europeans for the risk related to tergiversating in a gas dependence with Russia, Berlin will agree upon Gazprom’s offer and will allow for the replacement of the Ukrainian transit node with the German one.

However, Ukraine has a counter offer. The Prime Minister of Ukraine, Arseniy Yatsenyuk, wants to encourage the Western investors to modernize Ukrainian pipelines. He commanded the Ministry of Energy to write an act that would make the investments into the Ukrainian transit system attractive. Furthermore, he appealed to the country regulator for a fast execution of new transit tariffs for Russia. – We will not subsidize Russians – he said. Kiev also fights for increasing the reverse gas deliveries from the West, mainly in Slovakia, which provided the access to the “little reverse” and might also let Ukrainians in on a connection of a much bigger capacity. On Tuesday, the Ukrainian delegation will attempt to discuss this topic during the talks with the European Commission in Brussels. After reforming the gas sector, Ukrainians want to get the Western companies, which Gazprom would gladly replace in this project, to take part in the consortium that administrates the GTS. In the future, companies from Europe or USA and Ukrtransgaz could control the Ukrainian pipes. The West would then have a real influence of the transit of gas through the territory of Poland’s neighbor and wouldn’t have to search for an alternative by cooperating with Russia.

Read also: Gazprom is losing its influence in Kremlin

What will the West choose? The Ukrainian crisis should give the answer to that. However, if it doesn’t, a gas Yalta might be created – an agreement between the Western countries and Russia that would disregard Ukrainians and which would greatly weaken Kiev’s position during negotiations with Moscow. Then, the Ukrainian membership in the Energy Community will only be on paper and the efforts of the European Commission will be buried by the pro-Russian policies of the EU’s member countries.

However, in Washington there are signs of support for Ukraine in the negotiations with Russians. It is possible that, instead of the dependent on Russia Germans, it will be the Americans who enforce an understanding that will be more advantageous for that country. Or maybe a Polish company should enter the gas consortium?

Translation: Marlena Kister

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