Rostislav Ishchenko: Ukraine Demands Gas Guarantees

Translated by Ollie Richardson & Angelina Siard


Ukrainians are the greatest optimists on the planet. Some 10 years ago (in 2008), most of them, including the heads of the government and “Naftogaz”, did not believe that the “Nord stream” would be built…

You shouldn’t judge these people strictly. Ukrainian journalist Dmitry Gordon still believes that now “Nord stream-2” will not be built because the US is against it, and that nobody dares to speak against the US. It is not clear, however, how the US allowed “Nord stream-1” to be built. It was probably an oversight. They were distracted by Libya.

But some Ukrainians nevertheless sensed something bad. Especially after the pilgrimage of European leaders to Putin in Sochi and St. Petersburg, who collectively scolded the United States and fawned over Russia. Especially as Merkel in Sochi again emphasised that “Nord stream-2” is so pleasant for the Germans that it will be surely completed. And the Bulgarian President, who recently disrupted the construction of “South stream”, asked to return to negotiations over a direct gas pipeline from Russia to Bulgaria. By the way, now Russian gas goes to Bulgaria through Ukraine.

And here Putin also flew to Austria and declared “Nord stream-2” and a discussion about problems related to Ukrainian transit in the program of negotiations. This visit does not promise anything good for Ukraine. The Chancellor of Austria Sebastian Kurz is favourably-configured vis-a-vis Russia, which he managed to confirm during the recent visit. Austrian business is extremely negative about anti-Russian sanctions, the Austrian government insists on their abolition. Together, they learned to get around them using joint efforts so well that the trade turnover between Russia and Austria last year alone increased by more than 40%.

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Let’s also not forget that if Germany is just planning to become the largest European gas hub, then Austria, relying on gas storage facilities in Baumgarten, is already this. And if for Berlin only “Northern streams” are important, then Vienna is also interested in “Southern” ones, including the second stage of the “Turkish stream”, through which gas is supposed to go to the EU. Given the new role of Germany in ensuring gas supplies to Europe, it is necessary to reallocate the roles in the market.

“Streams” bring huge benefits to both Germany and Austria. Now they will be the main transiters of Russian gas for their EU partners, taking over the role that Ukraine so stupidly abandoned, naively believing that the United States will solve all its problems for it. For Russia such a change in the main transit countries is also beneficial. According to the current contracts, Gazprom is responsible for the supply of gas to the EU border. Ukrainian threats of the blockading transit fell under the definition of force majeure and it is unlikely that Gazprom would have had to respond to claims for a gas shortage, but the company could lose its reputation as a reliable supplier, and the market share along with it. That’s why Gazprom was obliged by all means to maintain the regularity of its supplies to Europe. “Streams” remove the factor of a careless transit country. Gas from Russia comes directly to the EU, without intermediaries.

And here the Bulgarian syndrome captured Ukraine. Let me remind you that the President of Bulgaria blocked the construction of “South stream” a year and a half ago, and now, realising that his country is not only left without revenues from transit, but also without cheap gas (and how much gas that will come in transit through Germany or Austria will cost is unknown), began to beg for a direct gas pipeline from Russia in his country. It is unlikely that he will be able to convince Putin. The volume potential of “South stream” and the volume needed by Bulgaria cannot be compared. Bulgarians consume too little – the gas pipeline will not pay off. Bulgarians cannot lay the pipe themselves. In fact, they are asking Gazprom and Russia for charity. This is what gave Putin a reason to note that he is afraid of references to brotherhood, because “elder brother” all the time has to pay.

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But Bulgaria still asks and its requests are quite moderate. If it finds consumers for its proposed pipe at least for 12-15 billion cubic meters of gas per year, then the project can become profitable. By the way, it is precisely such a volume of transit that Gazprom plans to keep in the Ukrainian gas transit system after the launch of all the “streams” at full capacity. So Sofia and Kiev can become competitors.

Compared with Bulgaria, the Ukrainian position is the apogee of arrogance and inadequacy. Having finally understood that after a year and a half it is possible to really be left without transit, Ukraine didn’t find anything better than to demand guarantees of filling its gas transit system with transit gas. Today, Kiev earns about $2.5 billion a year in transit and does not want to lose a kopeck.

That’s why Ukraine’s permanent representative to the Council of Europe Dmitry Kuleba demands that Russia and Germany jointly guarantee Ukraine the preservation of transit. It’s good to have one “elder brother” who will pay for everything, and two are even better. But in order to receive something there is a need to give something. But Ukraine always proceeded from the fact that everyone owes it, because it needs it.

It will soon be 30 years that Kiev has been trying to squeeze out one-sided advantages, blackmailing both Russia, and Europe with its exclusive gas transit system. It is precisely for this reason that there was a need to invest tens of billions of dollars in “streams”, because Kiev, confident in its impunity and invulnerability, did not opt for any constructive dialogue. That is why almost all major European gas companies are involved in the financing and construction of pipelines, because the inadequate transit blackmailer makes everyone tired. And that’s also why the Ukrainian gas transit system lost its exclusivity, and soon it will become useless for everyone, because all financial, economic, and political costs associated with bypassing gas pipelines (against the construction of which there was indeed exclusive counteraction) are quite an acceptable price for getting rid of Ukrainian inadequacy.

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“Elder brother” no longer wants to pay (neither Russian nor German). Ukraine gets a full opportunity to independently earn for purchasing “pacifist” American gas, instead of instead of “aggressive” Russian gas.

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