Medvedev received Miller in the Kremlin and asked him to report on the situation over the February cold snap, when the demand for gas greatly increased both in Russia and Ukraine, as well as in Western countries.
"On certain days, as much as 40 million cubic metres of gas remained on Ukraine's territory, and this certainly caused damage to Gazprom's finances and reputation. At the same time, in this situation, there is no effective mechanism to control the actions of [Ukrainian gas monopoly] Naftogaz in Ukraine," Miller answered.
"Do I understand correctly that this means siphoning off gas?" asked Medvedev, according to a transcript of the discussion published on the Kremlin's website. In an apparent effort to impress foreign counterparts, Prime Minister Vladimir Putin also conspicuously published the transcript of his recent instructions to Miller.
Formally Gazprom is a private company in which the government has a controlling stake and which holds a monopoly over gas exports. On 5 February, Putin, who stands for presidential elections on 4 March, boasted that the return of state shareholder control over Gazprom as a victory of his years in power.
"Our Ukrainian partners took as much gas from the export pipeline as they felt necessary," Miller told Medvedev. He added that during the recent cold snap, Ukraine was taking gas at the annual pace of over 60 billion cubic metres (bcm).
Medvedev said Russia had different options for building South Stream, by giving it greater capacity or "stop at some middle point". But in view of the report made by Miller, he ordered that South Stream be built at its full capacity of 63 bcm.
"We will launch the construction in December. All the necessary instructions on gas pipeline design based on a 63 billion cubic metre capacity will be given without delay," Miller answered.
Ukraine denies wrongdoing
At the same time, the Ukrainian Mission to the EU sent around a statement, claiming that National Joint Stock Company Naftogaz Ukraine has not diverted a single cubic meter of natural gas transiting through its territory since the beginning of 2012.
In February 2012 Naftogaz informed Gazprom about possibility of supplying additional volumes of the resource to European consumers by extracting gas from the Ukrainian gas storages, the statement reads.
"Had the Russian side asked us, we would have helped the European consumers in the situation of a sharp drop in gas supply, the way we helped Turkey," Deputy Chairman of Board of Naftogaz Vadym Chuprun is quoted as saying.
The contradicting statements are reminiscent of verbal exchanges between Moscow and Kyiv over the 2009 gas crisis, which left a large part of Europe in the cold over a payment dispute.
COMMENTS
The above report is a very one sided view of what is a horrible complex and murky environment. Gazprom may have been quick to blame the Ukrainian’s for their short fall in winter gas supplies to Europe but they may also have been somewhat economic with the truth.
Certainly the Ukrainians are no angels but in this case the facts do not seem to support the claims being made by Gazprom’s CEO Alexi Miller and subsequently President Medvedev.
In 2010 the then Prime Minister, Yulia Tymoshenko, agreed a gas deal with Moscow that as history has since proven was not in Ukraine’s interests and, as a result, Ukraine’s “iron lady” now resides in jail for costing the nation billions.
This deal set a quota for Ukraine at a price of around $300 per thousand cubic metres which in it’s self was more than reasonable however as with most contracts, the devil was in the detail.
The unusually mild summer coupled with a drop in world demand for Ukrainian steel and chemical exports resulted in the quota being billions of cubic metres over stated and as a result of the agreed penalty system Ukraine is now paying $414 per thousand cubic metres which is one of the highest prices in the world today.
As a direct result of the contract the Ukrainians, quite rightly, have been filling just about anything that will hold gas in order to try to consume the quota within the $300 per thousand cubic metre price agreement. The natural gas storage reservoirs near Lviv that hold literally billions of cubic metres of gas are, according to the Ukrainian Minister of Energy, Yuri Boyko, full to bursting point with gas that Ukraine has paid for under the contract.
It is this gas that the Ukrainians were using to meet their winter peak demand as it was in their interests to use as much gas as possible within the contract quota as this would keep the penalty price down. Logically if the Ukrainians were stealing gas bound for Europe, as has been recently stated by Gazprom, this would reduce the volumes they were buying legitimately and therefore, under this quirky contract, cost them around $114 per thousand cubic metres more in penalties for gas they were not consuming.
One has to ask that if the Ukrainians had stolen the gas, where did they put it as the reservoirs are all full.
What Gazprom has not released in their announcement is that immediately after the shortfalls were reported, Moscow suddenly ‘found’ more gas which it sold to a number of EU countries for as much as $650 per thousand cubic metres, some $300 more than the average EU contract price…
As for building the new ‘Southstream’ pipeline this too could well just be bluff as Europe has already announce that it will reduce it’s dependency on Russian gas by around 60% by 2020 so one would have to ask quiet what it is Moscow intends to pump through what could well be a multi-million dollar white elephant.
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