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22nd Jul 2018

EU 'frustrated' as Russia gas talks break down

  • Here we go again: Current deadlock represents fifth gas crisis in 10 years (Photo: gazprom.com)

EU mediators have complained of bad will on both sides after Russia-Ukraine gas talks broke down, posing questions on energy security.

Maros Sefcovic, the EU energy commissioner, said in Brussels on Wednesday (1 July): “I think you see my frustration. I’m not trying to hide it”.

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“We need a much stronger demonstration of political will from both sides”.

He spoke after mediating talks between the Russian and Ukrainian energy ministers in Vienna the day before, which broke off without a deal.

Russia offered Ukraine a price of $247.18 per thousand cubic metres, similar to Poland’s. It also wanted freedom to change the price quarterly based on market shifts.

But Ukraine, which is closer to Russia than Poland, said it should pay less and wanted a fixed winter price.

The Vienna debacle means Ukraine has stopped buying Russian gas.

It has 12 billion cubic metres (bcm) in storage. But it needs 19 bcm come winter to ensure EU transit from Russia and meet its own needs.

The next “trilateral” meeting is to take place at the end of August.

Sefcovic said Ukraine can buy the shortfall via “reverse flows” from Hungary, Poland, and Slovakia.

But Russia says its contracts with EU states don’t permit reverse flow, in what Sefcovic described as an “extremely sensitive … highly technical” dispute.

Brackets

Reverse flow is one of many complicating factors.

Russia also says Ukraine should pay for gas it doesn’t need on a “take-or-pay” clause in a 2009 contract.

The two sides are contesting the contract in a Stockholm court, which makes them less likely to make concessions in the EU talks.

Russia has complained that Ukraine stopped energy supplies to Russia-occupied regions of Ukraine. But Sefcovic said the dispute is in “a bracket” outside the Vienna format.

Russia has also raised doubts that Ukraine can afford to pay for gas.

Sefcovic noted it can use money from the EU’s latest €1.8 billion grant. But he said it has “solid homework” to do on auditing its use of international funds.

High politics

With Russia and Ukraine in a state of undeclared war, the EU commissioner noted the gas dispute “has a role to play in the bigger political framework”.

“This is high politics”, he said.

He described the EU as a “neutral broker”. But the EU has taken sides in the conflict, with Russia economic sanctions and blacklists.

It is also pursuing an anti-trust case against Russian supplier Gazprom, angering the Kremlin.

“The issue of sanctions and the anti-trust case against Gazprom weren’t raised and I don’t have the feeling they were affecting negotiations”, the EU commissioner said.

Nord Stream

He did criticise Russia’s plan to build new pipelines bypassing Ukraine, however.

Referring to Russia’s proposed Turkish Stream, a related Greek Stream, and an additional leg of Nord Stream, he said Moscow is painting a “blurred picture” on future supplies.

He said the new pipes aren’t needed because existing transit capacity is 40 percent-underused and EU gas consumption is in decline.

He also said new projects must conform with the same EU laws bedevilling Gazprom in the anti-trust case.

The commissioner noted that years of Russia-Ukraine gas crises have harmed the image of both administrations.

He said that whenever he meets average people on his “energy tour” of EU cities, they ask him what he’s doing to reduce gas dependence for the sake of security.

“Gas supplies have got the image of something you have to worry about”, he said.

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