The case for a gas transit consortium

DISCLAIMER: All opinions in this column reflect the views of the author(s), not of PLC.

Gas supply interruptions from Russia to the EU via Ukraine show that the current “status quo is defective and unsustainable as a policy,” argue Elena Gnedina and Michael Emerson, research fellows at the Centre for European Policy Studies (CEPS), in a January policy brief.

Indeed, the researchers claim that there has been “little attempt on either side to reach a pragmatic solution that would once and for all free the gas trade of political tensions and mischievous trade practices”. 

To resolve the stand-off, Gnedina and Emerson propose an “international gas consortium” that would bring the “Ukraine, EU and Russia to jointly manage the Ukrainian trunk gas pipeline. 

The CEPs paper outlines “three types of arrangement” under which such a consortium could take shape: 

First, the “Ukrainian government could sell a stake in Ukraine’s gas transit system (GTS) to a consortium,” the researchers suggest. Alternatively, the “pipeline could be subject to a concession granted to a consortium for a long period”. 

If neither of these possibilities work out, Ukraine could “transfer the management of the GTS to a consortium for a fee, but remain under obligation to rehabilitate the system itself,” they argue. 

The consortium would be accompanied by a “binding treaty establishing the ground rules, signed and ratified by the EU, and Russian and Ukrainian governments,” the authors assert. A treaty would “protect it from political instability” and “specify how the trunk pipeline of the consortium would be legally and managerially separate from the domestic Ukrainian gas distribution network,” they argue. 

Whilst Gnedina and Emerson admit that their consortium proposition “does not offer an overarching solution to the problem of security of energy supplies for the EU,” they maintain that it could “serve the needs of all the parties involved” and “mend the existing cracks in EU-Ukraine-Russia cooperation”. 

“Whether they like it or not, all three parties are highly dependent on each other,” the CEPS paper declare. Gnedina and Emerson insist that the EU, the Ukraine and Russia “need to exploit every opportunity to re-launch their energy cooperation”. 

Establishing an international consortium between the three blocs would represent a key step towards the “resolution of this appallingly disorderly gas transit affair,” the researchers conclude.