A double “gift” from Gazprom
Ukraine entered the winter season with several considerable “achievements” in the gas sphere. At the end of last week Ukraine’s fuel and energy minister Yurii Boiko announced, at a meeting in Sumy oblast, that in Moscow a “document was signed, which, while not providing an absolute guarantee, secures our situation in regards to gas transit over the next five years.” By this he meant that the annual amount of Russian natural gas transiting through Ukraine should not be less than 112 billion cubic meters, which Ukraine has wanted for a long time (last year our country had to decrease gas transit to Europe by 20.4 percent, to 95.2 billion cubic meters). But if a guarantee is not absolute, is it a guarantee? So far it is not easy to answer this question. The fact is that Gazprom, as it looks, made a double “gift” to Ukraine’s Naftohaz before the New Year: not only a partial guarantee for stable transit in the future, but also an advance payment for it in the amount of 1.5 billion dollars. This appears to be a key element. “And if less gas is transported, the advance Gazprom gave us,” explains Boiko, “will be returned later than in five years.”
However, it is clear that the advance is not a credit. Therefore, Ukraine will return it, of course, not in money, but in transit services. If Russia, after the launch of the North and later South streams, which bypass Ukraine, decreases the amount of gas pumped through the Ukrainian gas transport system, the payment in kind will decrease automatically, to no detriment for the Russian side. So, the “guarantee” the minister is talking about is really not absolute.
Moreover, it is quite probable that the advance of a billion and a half brings with it one more worrying aspect, which Boyko does not necessarily want to convey to Ukrainian taxpayers, who constantly subsidize Naftohaz. This long-term prepayment inevitably means Ukraine’s refusal, for the entire period of returning the advance, from any attempts to increase the transit rate. Though the post-crisis economic recovery in Europe will inevitably cause further growth of oil prices, and hence the potential revenue for Ukraine. It is notable that simultaneously with Boiko’s information about the advance-guarantee, the information appeared about the plans of Naftohaz and its branch, the company Ukrtranshaz, to invest 3.1 billion hryvnias in the reconstruction of the gas transport system already in 2011. It is clear that the timing of the two messages is not accidental, and the related expenses, most likely, will be financed with the Russian advance. According to Naftohaz, 1.22 billion hryvnias will be invested in the updating of the trunk gas pipeline and gas distribution stations, about 1.5 billion hryvnias will go into the reconstruction of compressor stations, and over 200 million hryvnias will be spent on the construction of underground gas depositories.
Ukrtranshaz advertises its plans on the replacement of gas pumping gas-turbine units with electric-driven ones. Only due to this they plan to save half a billion cubic meters of gas and 150 million hryvnias in 2010, as compared with 2009. “Each stage of modernization gives both production and financial benefits for the company. Improving Ukrainian transit potential by means of hi-tech up-to-date solutions is our task,” the press service cites Serhii Vynokurov, director general of Ukrtranshaz.
Certainly, all this is wonderful. The question is how justified it is to invest so much money in a pipe if there are no reliable guarantees of filling it with gas, especially given the construction of alternatives? Don’t they understand this in Ukrtranshaz and Naftohaz? Naturally they understand the risks for Ukraine. Where does this enthusiasm for reconstruction come from? Obviously, the recent round of gas negotiations in Moscow led the parties not only to the advance for transit, but also pushed them in the direction of concluding an agreement about a joint venture for managing the Ukrainian gas transport system. And this, in its turn, is regarded as the first step in uniting the two gas monopolists, Gazprom and Naftohaz, and from the lips of Gazprom authorities and Russia it sounds as a guarantee of filling the Ukrainian pipe. But in Ukraine this idea, as it is known, doesn’t get the necessary support, and therefore the progress of its realization is not publicized. However, it looks like a way to study the reaction of Ukrainian public opinion, information about two other joint ventures was spread — on mined methane gas and natural gas production — after the development of the structure of Pallas on the shelf of the Black Sea. At this, it is interesting that the Russian side informed about setting up these joint ventures as if it were an accomplished fact, while the Ukrainian party only related negotiations. Moreover, Prime Minister Mykola Azarov characterized such an approach of the Russian party as a form of pressure and tied the success in the negotiations with solving the entire set of gas problems, that is with Ukraine’s acquiring guarantees for stable supply of Russian gas to Europe, and with changing the formula used for determining the gas price.
The recent Maidan events moved gas issues to the periphery of public attention. Only the energy expert Bohdan Sokolovsky reacted to the problem of these joint ventures. According to him, “This is the first time in all years of independence [...] as a rule, puppet governments act like this in places like Africa, not in civilized Europe.” The strictness of this statement is supported by the fact that, as the expert supposes, such projects are beneficial for Russia and destructive for Ukraine.
In the meanwhile, on December 1 the Energy Council on the level of ministers of the European Union and the US, assessing Ukraine’s actions in the gas sphere, recognized them quite satisfactory. According to the message of the press service of the Ministry for Fuel and Energy, the Energy Council pointed out in its statement: “We were encouraged by the initial steps Ukraine has made to reform its energy market, notably, the passage of the natural gas market law, aligning domestic gas tariffs to market conditions, and signing the Protocol of Accession to the Energy Community.” The council entrusted the work group on energy security to maintain close contacts to support the Ukrainian government in the issues of the gas transport system modernization, improving the investment climate in hydrocarbon extraction, etc.
It looks like Ukraine, which earlier enjoyed unanimous moral support from Europe in discussions with Russia, is now being left alone. This means that the government of our country must take a principled approach to all discussed projects, focus on national interests, and neutralize threats to national security.
