Energy analyst: Russian proposals to use Ukrainian pipelines a ‘joke’

Oleksandr Sukhodolia [Pavol Szalai]

If Russia’s gas supply to Europe is to remain reliable, the Ukrainian system must run parallel to Nord Stream 2, Oleksandr Sukhodolia told EURACTIV Slovakia.

Oleksandr Sukhodolia works as an energy analyst at the National Institute for Strategic Studies within the Ukrainian Presidential Administration.

Sukhodolia spoke to EURACTIV.sk’s Senior Editor, Pavol Szalai.

The US Congress passed a law enabling sanctions against European firms participating in Nord Stream 2. Is Ukraine relieved?

Not so much. Of course, the law is the right move in general. But it looks like “economic sanctions” against Russian energy projects are not as effective as we could expect. Besides, at the last moment, Congress changed some provisions of the law opening loopholes for Gazprom to proceed with Nord Stream 2. There is a legal way to go around the US sanctions.

Germany and Austria strongly criticised the law and accused the US of meddling in European affairs.

The draft law was stricter. Following the remarks of German and other European officials, the Congress amended the law. The limit for shares in Russian energy projects is now at 33%. It reacted to the wishes of some European leaders and companies. I understand that the US and EU are trying to sustain a common strategy towards Russia and it is very difficult. The sanctions have remained part of a bigger West-Russia relationship.

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The European Commission has asked member states for a mandate to negotiate Nord Stream 2 directly with Moscow. German Chancellor Angela Merkel has said she sees “no need” for such a mandate. How do you view the debate?

It is the EU’s business how it handles different projects. As for the legal aspects, let us trust EU’s lawyers. But it is also a very complicated political issue, one that concerns the EU’s values and declared principles of solidarity. Some European energy companies are trying to work closely with Russia regardless of the internationally imposed sanctions. Some lobbyists in the industry – especially from Germany – are trying to do business as usual. Nord Stream 2 (being) supported by Germany is one example; the German regulator’s decision favorable to Gazprom on the utilisation of the OPAL pipeline (between Germany and Czech Republic) is another one. Siemens has supplied technology to Crimea for a gas power plant despite the sanctions. This leads us to the issue of political responsibility. As Ukraine defends the EU’s values stated in the Association Agreement, these cases logically make us ask if the EU is serious vis-à-vis Ukraine.

Does the issue of Nord Stream 2 boil down for you to the basic question of EU-Ukraine relations?

Yes. The most recent negotiations on the Association Agreement with Ukraine revealed the reluctance of EU officials to consider any option for Ukraine to join the EU. At the same time, some countries and companies are trying to realise projects with Russia against Ukraine’s ability to survive the war with Russia.

What is Ukraine doing to stop Nord Stream 2?

There are official measures – petitions from the Ukrainian parliament and its members to their European counterparts, letters to the European Commission, to the European politicians. We have correspondence between the national ministries of foreign affairs and ministries of energy. We organise conferences in Brussels. We support NGO and expert activities. Our gas company, Naftogasz, is very active. They reveal the real purpose of Nord Stream 2 and show that it does not increase Europe’s energy security. On the contrary, it will decrease it, because it will lead to Russia’s monopoly of the European market.

However, pro-Russian activity in Europe is stronger, it has more capacities. The propaganda supporting Nord Stream 2 is huge.

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Propaganda is a very strong word. Do Russians use false arguments to defend Nord Stream?

The Russians have developed a very sophisticated system of propaganda. Ukraine has actually become the first country where this method was used by Russia. We are the battlefield.

Do you mean the war in Donetsk?

Not just Donetsk, also Crimea. In fact, it started in 2003. The methods to manipulate information have also been used in Europe in recent years. They don’t tell the truth, only part of it, or they simply lie.

Can you give a specific example regarding Nord Stream 2?

The Russians argue Nord Stream 2 will increase Europe’s energy security, because the Ukrainians are corrupt and steal gas from pipelines. It is the old story, which has not been backed by proofs. Since 2010, the transit of gas has been stable and reliable. Even during the war, nobody has had any problems transporting Russian gas through Ukraine.

Blaming Ukraine is Gazprom’s standard tool of propaganda. For example, during the winter of 2012, there were problems in Russian gas supply to European consumers. Russia blamed Ukraine as usual, but in fact it only attempted to cover the shortages on its internal market. It had stopped pumping gas into the Ukrainian system on the border.

The Russians also claim that new pipelines will secure physical delivery. It isn’t true, either. Russia has recently interrupted the flow in Nord Stream 1, because it needed to repair it. And they have been using the Ukrainian system. Nord Stream 1 and 2 cannot provide technical reliability of the transit. You always need to have additional capacities, in case there are problems with the main pipeline.

Who will pay for keeping the Ukrainian pipelines available and on the standby for the Russians? Should Ukraine pay by itself? And what about European solidarity?

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The expensive new Nord Stream 2 gas pipeline would not be necessary if Ukraine took certain measures to ensure gas-supply security, argues Alan Riley.

Do you have a cost estimate for keeping the Ukrainian pipelines running?

Not at the moment. We expect the Ukrainian system will be utilised at least at the current rate. Another question not answered in the European press is why should European consumers pay for the new pipeline. If the Russians say that transit will be cheaper via Nord Stream, it is also not true.

Can you say with certainty what the price for transit will be?

I don’t know for sure. But Nord Stream 2 implies an investment, which must be returned. Ukrainian pipelines have recovered the basic investments.

Even if Nord Stream 2 is built, Germany said it wants to sustain gas transit via Ukraine, and Russia has conceded, too. Is it a realistic plan?

Both Russian President Vladimir Putin and Gazprom CEO Alexander Medvedev stated that they can provide gas transit via Ukraine at the level of 15 BCM per year. This may be destined for the internal consumption of Bulgaria, Slovakia, Hungary and Serbia. That is all. This is a joke. Such transit volume is not sufficient to sustain the huge Ukrainian system.

Is Ukraine making progress in reforming its internal gas market towards higher transparency and efficiency?

Maybe Ukraine is not progressing as fast as it would like to, but it is going in the right direction. We are improving legislation in line with Ukraine’s Association Agreement with the EU. We have adopted a law corresponding to the 3rd energy package. We have more than 30 Western companies supplying gas to Ukraine. Some of them have direct access to consumers. We are now discussing the relevant legislation that will enlarge the scope.

A few months ago, we adopted legislation allowing European companies to keep gas in underground storage for 1000 days in a tax-free regime and sell it anywhere. The memorandum we discussed is a proof we are opening our market.

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The European Parliament stood up to its role as the democratic conscience of the European Union by saying loud and clear that the Nord Stream 2 project must be stopped, writes Jacek Saryusz-Wolski.

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