Monday

20th May 2019

Ukraine wary of EU's Russia gas deal

  • Russian energy chiefs want to pump more gas to Europe via Nord Stream (Photo: gazprom.com)

The EU is keen for Ukraine to accept a winter deal on Russian gas, but Ukraine is wary of the terms and of broader EU-Russia energy ties.

The deal - put forward by the European Commission in talks in Berlin last Friday (26 September) - currently exists as three sheets of paper with no legal status or signatures.

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It is being discussed in Kiev and Moscow. Brussels hopes they will agree to it by the end of the week and turn into a “binding protocol” by the end of next week.

If they do not, people in eastern EU states, the Western Balkans, and Ukraine will be at risk of electricity shortages and freezing in their homes during winter.

If they do agree, Ukraine will pay Russia $3.1 billion of debt and pre-pay for gas each month at $385 per thousand cubic metres (tcm), while Russia will deliver 5 billion cubic metres (bcm) of gas between now and April.

An EU source told EUobserver “the Russian side is basically in agreement already, but the Ukraine side is being more cautious”.

A Ukrainian diplomat gave one reason why Kiev is unhappy. He said the market price for gas should be $250/tcm and that Russian gas firm Gazprom is helping the Kremlin to “pay for the war” in east Ukraine.

“Why should we support a company that is supporting terrorists in Ukraine and even paying for this war?” he told EUobserver.

A Ukrainian analyst, Michael Gonchar, who used to be a senior executive at Ukraine’s top gas company, Naftogaz, and who has read the EU’s three-page accord, gave a less emotional response.

He said the “protocol” should be enshrined in international law if Gazprom is to stick to it. He added that it should spell out how much of the 5 bcm is to be delivered to Ukraine each month, how much of it is to be transited to the EU, and how much is to stay in Ukraine.

“This deal is not good for us because it is too vague, so Gazprom can play with it to exert pressure”, he noted.

Gonchar said one scenario is that Gazprom will reduce Ukraine supplies, claim that Ukraine stole the gas, and use the crunch to urge the EU to let it pump more gas via the Nord Stream pipeline to Germany.

The Ukrainian diplomat also complained the EU rejected all its energy security ideas in the past few months.

Kiev suggested the EU, Russia, and Ukraine should put monitors at pumping stations to verify any allegations of “stolen” volumes and that EU firms should buy gas at the Russia-Ukraine border instead of the EU-Ukraine border so they have more control of transit.

The diplomat added the commission has put on ice its three-year old probe into Gazprom price-fixing in Europe for fear of annoying Russia too much.

“There is no motivation from high-ranking authorities to conclude this. They have all the files but they are still waiting for the political signal”, he said.

For her part, a commission spokeswoman, Marlene Holzner, said the monitoring and gas-purchasing ideas are “old … we are moving away from these steps, which were designed to help cope with a crisis, to a situation where the gas will keep on flowing despite the [Russia-Ukraine] conflict”.

Another commission spokesman, Antoine Colombani, said the Gazprom probe is “actively ongoing” and that it is “normal” for complex cases to take a long time.

Meanwhile, even if the winter gas deal goes ahead, it might not be enough to keep everyone warm.

The 5 bcm figure is based on EU and Ukraine needs factoring in reverse flows from Hungary, Poland, and Slovakia to Ukraine.

But Hungary last week stopped supplies citing “technical reasons” after a visit to Budapest by the Gazprom CEO.

The commission’s energy supremo, Gunther Oettinger, who drafted the Berlin agreement, said in the German capital on Friday that Hungary did nothing wrong.

“[EU] member states also need to fill their own storage tanks, so I don’t think this is a blockade [by Russia]”, he told press.

He added that Slovakia’s contracts with Gazprom also mean that it can refuse to let it use some of its pipelines to reverse-supply Ukraine.

Holzner on Monday added that while European Energy Community (EEC) rules oblige Hungary to deliver the gas to Ukraine “in principle” the terms of individual contracts with Russia trump the EEC regime.

The EEC is an energy club created by the EU and Western Balkan states, Moldova, and Ukraine in 2005.

Russia threatens EU states with gas cut-offs

Russian energy minister Novak has warned that EU states which re-export gas to Ukraine will face cut-offs, with Hungary already stopping its reverse flow.

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