Sunday

23rd Jul 2017

Ukraine government falls as fresh EU gas worries surface

The Ukrainian parliament has sacked its government due to the gas price row with Russia, as the European Commission tries to soothe fresh worries over EU gas supplies.

Two hundred and fifty out of 450 Ukrainian members voted against prime minister Yuri Yekhanourov's cabinet on Tuesday (10 January), Reuters and BBC report.

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  • Mr Yekhanourov had tried to present the gas deal as a Ukrainian victory (Photo: Ukraine government)

President Viktor Yushchenko is seeking legal advice to keep the government in place until the March general elections.

He said "This decision will be shown to be unconstitutional" while visiting Kazakhstan.

Opposition parties brought the motion of no confidence after Kiev agreed to pay Russia $95 per 1,000 cubic metres instead of the previous $50 on 4 January.

Kiev also faced criticism for getting a price agreement until the end of June only, as well as involving unnamed and unaccountable Ukrainian businessmen in the deal.

Russia had originally pushed for price hikes to $230 per 1,000 cubic metres, with Ukraine foreign minister Boris Tarasyuk saying in December that the price push might be calculated to damage president Yushchenko's bloc.

The currrent crisis is the second to hit Ukraine since the Orange Revolution in November 2004, after president Yushchenko dismissed his first government in a corruption scandal in September last year.

EU gas worries resurface

The gas row sent shockwaves through the EU on 2 January, when supplies to member states such as Hungary dived hours after Russia turned off the gas to transit state Ukraine.

EU member states raised fresh gas supply concerns at an experts' meeting on Monday, with diplomats saying the June price deadline meant the same problems could resurface in the next few months.

A Ukrainian diplomat told EUobserver Russia will "no doubt" ask for sharp price hikes again, probably in mid May, but predicted Moscow would keep the gas flowing this time around.

"They would be stupid to do it a second time. They already dealt quite a blow to their reputations," he added.

The European Commission also tried to soothe nerves after seeing details of the Russia-Ukraine deal, saying that, under the terms of the contract, the new $95 per 1,000 cubic metres price will remain valid until 2007 if the two sides cannot agree on a new price.

But commission officials were unsure what might happen after 2007 in the worst case scenario, adding that the fall of the Ukraine government throws extra uncertainty into the situation.

Complexity of deal masks weaknesses

EU member states are worried that other aspects of the new Russia-Ukraine deal are also unsustainable.

The contract is a commercial agreement between state-owned Russian gas supplier Gazprom, Ukrainian-owned gas distributor Naftogaz and Swiss-registered Rosukrenergo, a joint venture co-owned by Gazprom and unnamed Ukrainian businessmen.

Under the deal, Gazprom sells Russian gas to Rosukrenergo at $230 per 1,000 cubic metres, Rosukrenergo mixes this with cheaper gas from Turkmenistan (bought for $45) and Uzbekistan ($35) and sells it to Ukraine at $95.

"How long will the Turkmenistan aspect of the deal survive?" an EU official asked. "It would not be unthinkable that Turkmenistan will develop ways to sell its own gas at a better price."

The Hungarian economics ministry told EUobserver that the Visegrad countries together with Austria, Croatia, Serbia and Slovenia are taking steps to reduce dependency on Russian gas following the recent supply crunch.

The group will hold talks at the end of January to present the European Commission with a "united front" to get "direct financing" for developing new pipelines via Turkey and the Adriatic coast.

But in the meantime, the EU's eagerness to keep Moscow sweet is visible in member states' weakly-worded resolution on a separate gas price row between Russia and Moldova.

Member states on Monday expressed "hope" for an "amicable solution" in a two line statement, after Moscow turned off Moldova's gas on 1 January asking Europe's poorest country to double gas payments to $240 per 1,000 cubic metres.

Greece to get €7.7bn loan next week

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Japanese prime minister and EU leaders to endorse major trade deal on Thursday in anti-protectionist message to Trump.

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