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28th Mar 2024

EU discussing fresh anti-gas crisis tactics

  • A gas storage tank: Ukraine seems to be hoarding supplies in aniticipation of a fresh Russian cut-off (Photo: net efekt)

European gas companies may end up buying excess volumes of Russian gas to help prevent a new EU supply crisis, in plans to be discussed at the EU summit on Thursday (18 June).

Russian supplier Gazprom is facing financial and technical difficulties after having contracted to buy set volumes of gas from Central Asian producers while facing a sharp drop in demand in the EU and Ukraine.

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At the same time, Ukraine gas distributor, Naftogaz, is running out of money to pay the Russian firm. But Ukraine has hoarded gas in its vast underground tanks to help see it through the winter in case Gazprom cuts off supplies.

The last Russian cut-off, in January, caused massive disruption in the EU, which receives 25 percent of its gas from Russia via Ukraine.

A high-level European Commission team, including Russia expert Gunnar Wiegand and energy security supremo Faouzi Bensarsa, discussed the situation with Naftogaz chief Oleh Dubyna and Gazprom Export director Alexander Medvedev in Kiev and Moscow last week.

The commission delegation reiterated that the EU will not offer public money to solve the problem.

But it did float the possibility of private EU gas companies buying excess Russian volumes and stockpiling them in Ukraine's storage facilities to help ease tension, according to one EU official familiar with the talks.

The move would put money in Gazprom and Naftogaz' pockets, with EU firms paying to use Ukraine's storage tanks. The European companies could then sell the gas on spot markets in winter to recoup their investment.

"The fact is that Russia has a much bigger problem than Ukraine," the EU official said. "We've already had one 'technical explosion'."

A Gazprom-controlled pipeline on the Turkmenistan-Uzbekistan border blew up in April after the Russian firm suddenly dropped gas pressure, in what Turkmenistan described as a deliberate "vacuum-bomb."

European Commission chief Jose Manuel Barroso and energy commissioner Andris Piebalgs on Monday night met with the directors of major EU gas companies including Eni, E.ON, OMV, Centrica, MOL, Gasunie and Gaz de France.

Part of the meeting was devoted to comparing notes on just how much gas Ukraine has stockpiled.

Mr Barroso will put forward the commission's proposals at an informal dinner with EU leaders on Thursday evening. The EU's "Gas Co-ordination Group" - a body of EU national-level and private sector gas experts - will also meet with Gazprom and Naftogaz envoys in Brussels the same day.

Gas princess seeks 'happiness'

Meanwhile, Ukrainian Prime Minister Yulia Tymoshenko on Tuesday asked European banks to loan the country $4 billion (€2.9 billion) to help pay for Russian gas purchases in the coming months.

In early June, Ukraine was forced to print 3.8 billion hryvnia and convert it to $500 million (€360m) to pay for May deliveries.

"The overall happiness of Ukraine, Russia and the EU must be financed by somebody," the prime minister said in a statement. Ms Tymoshenko is known as the "gas princess" after making a personal fortune in the gas trade in the 1990s.

German foreign minister Frank-Walter Steinmeier and Polish foreign minister Radek Sikorski also travelled to Kiev on Wednesday.

The trilateral mission is designed to help smooth relations between rival political factions in Ukraine during the economic crisis. But some Ukrainian officials see it as an empty stunt based on a misunderstanding of Kiev's adversarial brand of democracy.

"It's a ridiculous project," one Ukrainian contact said.

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