Ukraine needs to push for new energy suppliers

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

This article is part of our special report EU-Ukraine Relations.

As Ukraine remains dependent on Gazprom for its gas supplies under unequal measures, it is high time for the country to search for alternative carriers, writes Ivan Matiyeshyn, founder of People First.

Ivan  Matiyeshyn is the founder of the Ukrainian Foundation for Democracy-People First. The following was first published on Blogactiv.

"Information concerning possible signing of the gas agreement between Naftogaz of Ukraine and Germany's RWE recently appeared in the Ukrainian news media. What’s meant is the delivery of spot gas bought in Europe to Ukraine through in pipelines of Slovakia.

Even in case the short-term contract between Naftogaz and RWE is signed, it won’t reduce dependence of Ukraine upon Gazprom. Annual volumes declared by the new contract can make up about 1 billion cubic metres. Ukraine consumes about 70 billion cubic metres of gas per year – at least 40 billion cubic metres under the current contract.

Germany buys about 30 billion cubic metres of Russian gas annually. In winter  these volumes grow. At the beginning of March RWE declared its intentions to reconsider conditions of its own long-term contracts with gas suppliers. Priorities will be given to negotiations with the greatest gas suppliers. Gazprom has a leading place among them. Som 36% of purchases of RWE go to Russian gas according to long-term contracts.

Also the news media have been actively discussing information concerning Ukraine having conducted talks with Turkey and Bulgaria about the delivery of liquefied natural gas from Turkish storage facilities through the Bulgarian gas transportation system. It is possible already now to ascertain considerable problems of a possible future cooperation, since both countries are involved in the realisation of  the South Stream project. And hardly anyone will spoil relations with Russia by means of gas contracts with Ukraine.

Besides, such a scheme of gas delivery to Ukraine foresees the attraction of Romania as well. It is impossible to directly deliver gas to Ukraine by means of the Bulgarian gas-transport system. Hence, Ukraine can face the aggravation of relations with Romania which already aren’t simple.

During the winter period European countries constantly fall short of volumes of gas, especially supplies from Russia. This winter Gazprom was simply compelled to limit gas deliveries to Europe, concentrating fuel resources on covering Russian consumer demand.  No additional volumes of gas were within reach. And nobody in Russia was going to sacrifice the heating of his own population on the eve of presidential elections.

Unlike previous years, Europe is starting to cautiously treat the constant accusations addressed to Ukraine of taking gas meant for Europeans. The fact that Ukraine managed to step in to fill European needs from its own storage facilities is known, as is the fact that Gazprom lacks financing for the development of new deposits and building of gas pipelines.

In this sense the statements of the Russian leadership concerning the acceleration of building of South Stream sound too optimistic. The situation around the reduction of volumes of Russian gas supply to Europe is a bright confirmation here.

Firstly, this has placed the very participation of European companies in the project of “South stream” construction in doubt.

Secondly, a traditional charge of Ukraine’s unauthorised gas takeoff already didn’t surprise anybody. The only thing that it showed was a lack of imagination in terms of creating provocations.

Gazprom has been constantly denying the reduction of deliveries to Europe. However, accusations were voiced by the European countries, and by no means by Ukraine. Austria, Slovakia and Poland, which suffered from the cold most of all, declared that deliveries were reduced. Germany, Hungary, Bulgaria, Romania, Greece and Italy also demanded that deliveries be increased.

Already in the middle of February Gazprom reduced the gas price for the European consumers by 10% on average, whereas Ukraine is unsuccessfully trying to get a discount for Russian gas. Previous negotiations were unsuccessful. Signing of an additional agreement to the current gas contracts again remains only possible.

As for today, preparation for parliamentary elections becomes more topical in Ukraine. The Ukrainian leadership won’t afford itself such luxury as the surrender of the Ukrainian gas-transport system to Russia on the eve of elections. Gazprom is interested in the creation of a bilateral consortium on possession of the Ukrainian gas-transport system. And this is the condition for a discount of the gas price. Ukraine insists on the participation of Europe. Hence,  there is no sense to expect the revision of the gas contracts of 2009.

Moreover, the price of oil is high and will grow in the near future, influencing the price of natural gas. And these are the additional means for the Russia’s budget. The situation is deteriorated for Ukraine also by the fact that Gazprom goes through financial difficulties it terms of development of new gas deposits and construction of new gas pipelines. Therefore, Russia’s absence of desire to reconsider contracts unprofitable for Ukraine is completely clear.

Gazprom has occupied an advantageous position of an observer and recipient of additional profits, whereas everything that has been left to Ukraine is to disseminate the information about an active search of alternative energy-carriers in mass-media."

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