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24th Sep 2018

Gazprom warns EU of winter 'catastrophe'

  • Gazprom's deliveries to Europe have gone up by 15.6 percent in 2013 so far (Photo: qwertyuiop)

Gazprom has warned that Ukraine might not have enough gas to feed EU transit customers in the coming winter.

The deputy chairman of the Russian firm, Vitaly Markelov, told press in an emailed statement on Thursday (14 November) that Ukraine should have stored 21.5 billion cubic metres (bcm) of gas in its underground vats, but that it is likely to have just 14 bcm by the time winter bites.

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“It’s a catastrophe … in these conditions, the winter transit of Russian gas won’t be possible because storage won’t be enough to compensate for Ukrainian consumer drawdowns," he said.

Referring to the danger of a 2009-type crisis, which saw power cuts in some eastern EU states, he added: "Everyone knows the risk … it's a serious situation."

The EU gets about 25 percent of its total gas imports from Russia via Ukraine.

But Russia-Ukraine gas relations are in jeopardy on two fronts.

On one hand, Ukraine has been complaining for three years that Gazprom is charging it too much.

On the other hand, Moscow has indicated it will drop the price only if Kiev ditches plans to sign a strategic EU treaty and joins a Russian Customs Union instead.

The two problems are intimately linked.

Ukraine's high price - about $400 per thousand cubic metres (tcm), almost twice what EU customers pay Russia - was fixed in a 2009 contract by the then Ukrainian PM Yulia Tymoshenko.

The contract includes a "take or pay" clause, meaning that Ukraine has to buy a fixed amount or pay for the shortfall anyway.

Ukraine has jailed Tymoshenko for signing the deal, in a move which might well scupper the EU treaty.

At the same time, Ukraine stopped buying from Gazprom last week, amid Russian complaints that it is owed almost $1 billion for 2013.

For its part, the European Commission is being kept in the dark.

An EU official told EUobserver on Thursday that it has no more information than what it reads in Russian and Ukrainian media.

Ukraine's EU embassy and its state-owned gas distributor, Naftogaz, declined to comment.

But Alexander Morozov, HSBC bank's chief economist on Russia and Ukraine, indicated the fate of EU winter supplies rests in the hands of one man: Ukrainian tycoon Dmitry Firtash.

Firtash - who has self-confessed ties to the Russian mafia and who is described by EU diplomats in Kiev as a Kremlin stooge - bought 5 bcm of Russian gas at a discounted price of around $250/tcm.

Morozov said Ukraine is now hoping to fill any EU transit shortfall by buying 3 bcm from Firtash's firm, Ostchem.

He also warned the plan might not work, however.

"There is a dispute on who has the right to Ostchem's gas," he told this website on Thursday from Moscow.

"Reports indicate that Ostchem got the discount on condition that Gazprom can buy back the gas if European demand is higher than expected. But it is unclear how this arrangement would work if he has sold the gas to Naftogaz," the analyst said.

Morozov noted that secrecy on details of the 2009 Russia-Ukraine contract and political factors make the situation unpredictable.

"The mood [in the Kremlin] changes every day," he noted.

"I think there will be more clarity after the EU summit in Vilnius, when we know which way Ukraine is going," he said, referring to an EU meeting with former Soviet countries in Lithuania on 27 November, at which Kiev might ink the EU treaty.

He added that his "best guess" is "there won't be a problem" on EU gas because "neither Russia or Ukraine is interested in this kind of development."

His "guess" was borne out by Gazprom's financial statement on this year's quarter two earnings.

It said on Thursday that its gas deliveries to Europe went up 15.6 percent in 2013 so far.

"Gazprom’s European gas export data reaffirms good prospects for the entire year," it noted, describing itself as "the only reliable external supplier able to increase supplies to European markets."

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