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26/07/2016

Ukraine no longer wants reverse gas flows from EU

Europe's East

Ukraine no longer wants reverse gas flows from EU

eduard_stavitsky.jpg

Ukraine has ceased buying gas from Europe and will instead purchase the fuel solely from Russia, as it offers the lowest prices, Ukraine’s energy minister Eduard Stavitsky said yesterday (9 January). 

After Russia's gas monopoly Gazprom has brought down the price of its natural gas for Ukraine by a third – to $268 dollars per thousand cubic meter (tcm), Ukraine suspended imports of natural gas from European countries at the beginning of 2014.

In 2013, Ukraine had been paying around $400 per tcm to import an estimated 26-27 billion cubic metres (bcm) of gas from Russia, its main supplier. But last December, Russia agreed to slash the price of gas for Ukraine to $268.50 per tcm after Kyiv walked away from a free trade pact with the European Union.

In recent years, the EU had made possible “reverse gas flows”, meaning sending gas to Ukraine from Poland, Hungary and more recently from Slovakia. Although this was basically Russian gas, it was still cheaper than the price of around $400 per tcm Kyiv was paying until recently.

Nearly 2 billion cubic meters (bcm) of natural gas has been imported by Ukraine from Poland and Hungary in 2013.

According to the December agreement between Moscow and Kyiv, the new price level must be confirmed every quarter, an arrangement that creates financial leverage for Moscow to prevent Kiev from seeking to revive ties with the EU.

Asked by EurActiv to comment this development, the Commission said today (10 January) that it had taken note of the media reports regarding the decision of Ukraine not to seek reverse gas supplies.

“Reverse gas flows are for Ukraine a possibility to increase competition and the security of supply. The Commission is a facilitator in the regard, but it’s for this country and companies concerned to decide on reverse flows,” Sabine Berger, spokesperson to Energy Commissioner Guenther Oettinger said.

Berger added that the Commission remained ready to reform the Ukraine energy sector in line with its commitments with the Energy Community Treaty. According to some expert views, Russia is pressuring Ukraine to exit the Energy Community Treaty, an EU initiative to bring closer to its norms and legislations countries in its neighbourhood.

Background

On 31 December 2008, Russia stopped supplying gas to Ukraine over a payment dispute. Russia said Ukraine was stealing natural gas destined for Europe for its own needs. Ukraine denied the charges, but said it needed "technical gas" to pump fuel through the pipeline system. 

On 6 January, supplies to Romania, Bulgaria, Greece, Macedonia, Serbia and Croatia were completely halted. It also emerged that several countries, including Bulgaria,

did not have enough reserves to make up for a supply cut. 

But at a later stage, the conflict left Europe with no supply of Ukrainian gas. At this point, the EU agreed to send observers to monitor the supply of gas earmarked for Europe. 

At a summit in Moscow on 17 January 2009, Russian President Vladimir Putin and his Ukrainian counterpart Yulia Tymoshenko struck a deal, saying that the crisis was over. The EU reacted cautiously.

Three days later, on 20 January, supplies to Europe began to flow again. European Commission President José Manuel Barroso welcomed the resumption of deliveries, after a two-week standoff that left millions of Eastern Europeans without heating in the middle of winter. But he also warned that long-term lessons should be drawn from the crisis. 

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