Wednesday

25th May 2016

Putin threatens to cut gas to Ukraine, EU countries

Russian leader Vladimir Putin has threatened to cut off gas supplies to Ukraine unless it starts repaying a huge debt and unless the EU agrees to joint talks on its economic future.

He said in a letter sent to 18 European leaders on Thursday (10 April) that “in the event of further violation of the conditions of payment, [Russian firm Gazprom] will completely or partially cease gas deliveries.”

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He noted: “Undoubtedly, this is an extreme measure. We fully realize that this increases the risk of siphoning off natural gas passing through Ukraine’s territory and heading to European consumers.”

He added that “in order to guarantee uninterrupted transit, it will be necessary, in the nearest future” for Ukraine to buy $5 billion worth of gas to be pumped into its storage vats.

Putin said Ukraine’s gas debt for this year alone is $2.2 billion.

But he noted that Russian discounts for Ukraine gas since 2009 amount to $35.4 billion.

He added that this is based on a 2010 deal for its navy to stay in Crimea, which the Kremlin says is no longer valid after it annexed the territory.

He also said it is based on his clemency on a “fine” relating to Ukraine’s 2009 “take-or-pay” contract (it has not paid for the gas it did not take), indicating that he could claim the discounts back.

The letter’s recipients are all heads of countries which depend on Russian gas transit via Ukraine.

They include EU countries Austria, Bulgaria, Croatia, the Czech Republic, France, Greece, Germany, Hungary, Italy, Poland, Romania, Slovakia and Slovenia.

They also include Bosnia, Macedonia, Moldova, Serbia and Turkey.

The letter went on to blame the EU for causing Ukraine’s economic crisis by sucking up its raw materials on the cheap while selling back expensive manufactured goods.

“To a large extent, the crisis in Ukraine’s economy has been precipitated by the unbalanced trade with the EU member states,” Putin said.

He added that the EU has given Ukraine nothing but “promises [of financial aid] that are not backed up by any real actions.”

He also claimed the EU has refused to hold joint talks with Russia on the crisis.

“All attempts on Russia’s part to begin real consultations failed to produce any results … European partners have unilaterally withdrawn from the concerted efforts to resolve the Ukrainian crisis, and even from holding consultations with the Russian side,” he noted.

“We believe it is vital to hold, without delay, consultations at the level of ministers of economics, finances and energy in order to work out concerted actions to stabilise Ukraine’s economy and to ensure delivery and transit of Russian natural gas,” he said.

The letter was circulated to press in Brussels by GPlus, a London-based lobby firm which works for the Kremlin and for Gazprom.

EUobserver asked a GPlus spokeswoman why it makes no mention of the EU’s €11 billion aid package to Ukraine or the International Monetary Fund’s $18 billion rescue plan.

EUobserver also asked why Putin says the EU has refused to hold talks when the European Commission has been meeting with Russian officials to discuss the impact of its draft free trade treaty with Ukraine and when there is an EU-Russia-Ukraine-US foreign ministers’ meeting in Geneva next Thursday.

The GPlus spokeswoman said: “His point is that Russia has been paying a huge price to stabilise Ukraine’s economy and the EU also has to play a part, not just rhetorically.”

She added: “There is a concern from the Russian side these talks [in Geneva] might be aimed at coercing Russia to reduce its gas price.”

Russia in the winter of 2009 already stopped gas deliveries to Ukraine causing blackouts in Europe, but also financial costs and reputational damage to Gazprom.

The European Commission chief, Jose Manuel Barroso, at the time said: "I've been involved in mediation processes since I was young, including in African matters. It's the first time I saw agreements that were systematically not respected … Gas coming from Russia is not secure. Gas coming through Ukraine is not secure.”

The EU and the US are currently working on short and long-term plans to reduce Europe’s gas dependency on Russia.

The plan includes “reverse flows” to Ukraine using pipelines from Slovakia, but Slovakia has warned that Gazprom might have the legal right to block this.

The US’ new ambassador to the EU, Anthony Luzzatto Gardner, was as blunt as Barroso in recent comments to press.

“Let’s be clear: Gazprom has been using energy as a weapon,” he said on 4 April, referring to Putin’s track record of using gas prices to gain political influence in former Soviet and former Communist states.

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