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Where there is no law, but every man does what is right in his own eyes, there is the least of real liberty
Henry M. Robert

Ukraine without Russian gas

Experts discuss what has already been done and what remains to be done so that the cut-off does not come as a shock to the country
17 June, 2014 - 12:02

As reported by The Day, a source close to the top management of Naftohaz Ukrainy told The Day early on June 16 that Russian gas destined for European countries kept flowing as of 9:20 a.m. of that day. However, gas supplies to Ukraine were already discontinued by that time, as shown in the relevant documents. Naftohaz requested Ukrtransgas to delay dissemination of that information. According to the source, there were certain nuances remaining yet in that matter.

After a few hours of silence, deputy head of Naftohaz Oleksandr Todiichuk confirmed to The Day the information about the termination of Russian gas deliveries to Ukraine. The company’s PR department press release, received by The Day, noted that the company had filed a lawsuit in the Arbitration Institute of the Stockholm Chamber of Commerce, demanding it to determine a fair market price for gas which Gazprom supplies to Ukraine. “The lawsuit also contains a requirement to recover from Gazprom overpayment for gas which was supplied by the Russian monopoly to Naftohaz since 2010.” According to the company, such overpayment amounted to 6 billion dollars.

Meanwhile, the EU Energy Commissioner Guenther Oettinger promised at the press conference after the gas talks held overnight on June 15-16 that the EU would invite Russia and Ukraine for a new round of talks before the end of June. As reported by Bloomberg, the commissioner noted that Russia and Ukraine did not agree on upcoming payments, and the talks were “much more complicated than expected.” According to Oettinger, the EU gas policy coordination group is scheduled to meet to seek resolution of the Ukrainian crisis. The European commissioner also stressed the importance of gas injection into underground storage facilities in Ukraine and expressed concern that Ukraine would be forced to take the gas from its storage facilities.

Probably influenced by the EU, Slovak company Eustream reported exactly on June 16 that it extended until July 4 the Open Season procedure, during which applications are accepted for using the Vojany-Uzhhorod pipeline. This interconnector is the way for our country to receive the greatest volumes of reverse gas from Europe. Initially it was assumed that applications for using this pipeline would only be accepted until June 23, after which it was planned to sign the relevant agreements.

Does it mean that Ukraine was actually not preparing for this decisive moment in gas conflict with Russia? No, it was preparing, Todiichuk said refuting this view, but it turned out that the time prescribed for filing the application was insufficient. In addition, he said, some people were of the view that the application might not be necessary, as it might be possible to agree with Gazprom on a price that would be lower than the European one. The expert (Todiichuk is still serving as unpaid president of the Kyiv International Q-Club) is confident that before the cold weather comes, Ukraine will have enough gas of its own production and supplied via the reverse from the EU. However, he said that in a period of very low temperatures, the cessation of gas supplies to Ukraine could bring troubles both for our country and for the transit of Russian gas to Europe.

President of the Kyiv Institute for Energy Studies Oleksandr Narbut answered this question of The Day as follows: “I want to believe that Ukraine is ready for an eventuality of life without Russian gas. I am not fully confident on this point, though. Very long and fruitless consultations, which were conducted in different formats, have not found those decisive solutions that could make such a crunch moment impossible in principle or not so tough for Ukrainian consumers and our gas market as a whole. There have been no solutions that were expected by me as well as the whole country. This government has not learned from the mistakes of its predecessors, and has not yet formed a professional gas crisis group, which would be able to prepare a serious strategy and tactics of the negotiation process. The government could also think more about the guidelines for such a negotiation group and its professional composition. The current team of negotiators lacked people with positive experience of pursuit of national interests, but there were people on it who were involved in signing of contracts the low quality of which led to the creation of this situation. All this makes me gravely concerned over Ukraine’s ability to fully respond to the challenges that have emerged in the gas and energy sector.”

“Serious concern,” Narbut continued, “comes also from low usage rate of our reverse routes. Volume delivered via two routes (Poland and Hungary) for the last month was only about 160 million cubic meters, while simple arithmetic shows it could have reached 600 million. Suffice it to say that the most capacious Hungarian reverse route of delivery does not exceed 50 percent of technological capability as used now. From my point of view, they are blocking non-Naftohaz-affiliated purchasers from signing gas supply contracts. I have not heard of any European company confirming deliveries under previously concluded contracts. It also weakens our position. The process of filing a lawsuit in the Stockholm Arbitration Institute took too long as well. This allowed the Russians to get ahead of us, as their claim was there before the Ukrainian one. That in itself tells a lot about the non-mobilized state of the Ukrainian position. I do not rule out that these shortcomings will turn out to be trifles. The fundamental conclusions on our readiness can be drawn after we hear not only the reaction and the story of the prime minister at the session of the Verkhovna Rada, but the president’s reactions to this crisis, too. It seems to me that the energy threats should be a subject of priority consideration for the head of state.”

By Vitalii KNIAZHANSKY, The Day