18th May 2021

EU-Ukraine relations at risk over gas crisis

  • Ukraine has a 22,000 km-long transit network (Photo: Naftogaz of Ukraine)

Ukraine's integration process with the EU could be harmed by the gas crisis the European Commission has indicated, as European firms begin wondering how to get their money back.

"Ukraine says it wants to be closer to the EU. If it wants to be closer, it should not create any problems for gas to come to the EU," European Commission President Jose Manuel Barroso said at a press conference in Prague on Wednesday (7 January).

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The remark came after his telephone conversations with Russian Prime Minister Vladimir Putin and Ukraine Prime Minister Yulia Tymoshenko earlier the same day failed to clarify why Russian gas flows to the EU via Ukraine halted completely on Wednesday morning.

"If both the Russians and the Ukrainians behave as they say they are behaving, there should be no problem," the commission chief said.

Russia has blamed Ukraine for the stoppage, saying Kiev shut down compressor stations channeling volumes to the EU, amid a week-old row over gas prices and debt repayments. But Ukraine says Russia simply stopped pumping gas at 7.00 am Kiev time.

Mr Putin's spokesman, Dmitry Peskov, acknowledged EU frustration with the conflicting accounts. "You are not sure who to trust, and I don't blame you," he told reporters on Wednesday afternoon.

EU foreign ministers and deputy foreign ministers will debate energy security at the morning session of an informal meeting in Prague on Thursday.

The gathering is likely to discuss sending EU monitors to measure gas flows on the Russia-Ukraine border and the possibility of calling a mini-summit of the Czech EU presidency, Russia and Ukraine. But it is unlikely to take any decisions.

"This is an informal meeting, more at the level of secretary of state. The real foreign ministers, such as Kouchner [of France] won't be there," an EU official said.

"The two sides [Ukraine and Russia] want the situation to become more political. Each side wants to get the upper hand by gaining an ally. But the situation is so un-transparent, it's too risky for the EU to get involved," another EU official explained.

For its part, Ukraine says it has shown the EU bank documents proving it has paid its 2008 gas debt to Russia, as well as all non-confidential papers relating to the structure of RosUkrEnergo - an intermediary company selling Gazprom supplies to Ukraine's Naftogaz.

A little more action please

"It is not acceptable for the EU to take any wait-and-see approach, or to consider this as only a bilateral crunch, since the interests of EU consumers are also at stake," Ukraine deputy foreign minister Konstantin Yeliseyev told EUobserver.

"I hope this idea [the mini-summit] will be top of the agenda on the EU ministerial meeting."

Gazprom and Naftogaz are set to hold talks in Brussels on Thursday to try and break the deadlock. But even if full flow and transit resumes the same day, it will take a further 36 hours for volumes to normalise in Europe, as gas slowly fills up Ukraine's 22,000 km-long transit network.

Eastern European countries Bulgaria and Slovakia have been the worst hit in the EU so far. Bratislava on Wednesday raised the option of restarting a nuclear reactor at the old Bohunica plant, following Sofia's call to restart units at the old Kozloduy nuclear facility the day before.

Both countries have curbed gas supplies to industry and consumers: in Sofia, street lights will be turned off on Thursday night to save energy, while Slovak-based firms US Steel Corp and Slovnaft have been forced to reduce output.

Who will pay?

Bulgarian economy minister Petar Dimitrov said on Wednesday night that Bulgaria may seek financial compensation from gas supply intermediaries such as Gazprom subsidiary Gazpromexport, Bulgarian firm Overgas and German-owned Wintershall.

Both Ukraine and Russia are pointing fingers at each other in terms of financial liability.

"They [EU firms and their intermediaries] all have contracts with Gazprom, so they should sue Gazprom," Ukraine foreign ministry energy expert Vyacheslav Kniazhnytsky told this website. Ukraine is "violating its Energy Charter Treaty [ECT] obligations" Russia's Mr Peskov said, with the ECT - a 1994 pact on energy security - carrying clauses on legal arbitration between parties.

Lawyers linked to Gazprom told EUobserver the company has been successfully taken to court in Europe before. But the 2006 gas crunch - which saw similar, if smaller, disruptions than the present day - did not lead to any major financial claims against the Russian firm.

Correction: the Gazprom-Naftogaz talks were originally to take place in Moscow on Thursday. But in the end they will take place in Brussels

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