The new European hub... Will Ukraine be a part of it?

Poland’s head of government Donald Tusk called on EU member states to create an energy union to reduce their dependence on gas supplies from Russia. “Regardless of how the Ukrainian story develops, one lesson is clear: excessive dependence on Russian energy makes Europe weak. And Russia does not sell its resources cheap – at least, not to everyone,” he wrote in an article published in Financial Times.

According to Tusk, the new energy union should be based on the principles of solidarity and mutual economic interest, and built along the lines of the existing banking union, or the earlier Euratom, which monitors trade in uranium. “Europe should confront Russia’s monopolistic position with a single European body charged with buying its gas. Once this has been achieved, Europe should undertake the lengthier task of breaking up the Russian gas monopoly and restoring free market competition,” Polish prime minister stressed. Meanwhile, according to Tusk, the new entity is to expand the use of fossil fuels (coal and shale gas) and intensify efforts to attract new suppliers (primarily the US and Australia) to the European market.

How will this initiative impact energy security of Ukraine, and what role can our nation play in creating the European gas hub or exchange? The Day posed these questions to president of the Kyiv International Energy Club Q-club Oleksandr TODIICHUK:

“Europe can replace Russian gas with Norwegian gas or LNG coming from Algeria or Qatar. The US has intensified their efforts, including by promoting their shale gas. Thus, the EU does not lack sources of gas imports.

“Ukraine must certainly join this energy community. Our country has emerged between two geopolitical entities: the EU and Russia. However, despite our proximity to the EU, we have not yet managed to integrate into its single energy space, even though such plans were announced earlier. It is one of the reasons why the EU, despite its declared desire to protect the Ukrainian gas interests, has not moved further to ensure its energy security by securing transit routes.

“Ukraine should be integrated into the new unified European energy system. It is the only way for us to get the EU’s protection from Russia’s attempts to put pressure on our economy by using its gas weapon.

“We should not let this opportunity pass. For example, we can pump gas in the reverse mode from one European country to another. It will bring us extra money in transit fees. The EU can use Ukrainian underground gas storage (UGS) facilities more.

“The very first point of the project is to create a so-called collector, a system of reverse gas supply in Europe, operating in the North-South direction. They are currently completing an LNG regasification terminal in Poland near Gdansk, with gas to be transported to Krk Island in Croatia. They are creating not a new pipeline on this section, but a system of interconnectors (supplemented with new pipelines in certain areas) that will start gas flows from North to South. The already available Ukrainian pipeline Ivasevychi-Dolyna that runs along the western border of Ukraine to the south should be a part of this project. For now, it is almost empty and if the connection to the European system is built, it can link this system to the Ukrainian UGS facilities, allowing Europe to store some of its gas there.

“I think joining the EU energy union would provide a guarantee that Ukrainian pipelines will be filled with non-Russian natural gas and act as an element of the European energy security architecture. To become an integral part of this system, Ukraine needs to move towards the European model of measuring gas. The EU receives gas in heat units or watts/kilowatts. Should we master one of these systems of European gas measurement, we will automatically switch to European standards. That is, we will not have to wait for accession to the EU to integrate into its common energy system.”

Arkady MOSHES, expert at the Finnish Institute of International Affairs:

“Europe has long been talking, and not always in vain, of bringing its energy cooperation with Russia down to the level when it ceases to be a factor in European economic security. To do this, certain things have been done, but as we can see, this process has been very difficult. Even opportunities provided by the already created common European legislation and the third energy package have not yet become the norm of conduct for all EU countries.

“There have been no critical changes: some countries will reduce their dependence on Russian energy, while others are not yet going to do it.

“In this case, we are talking about a proposal which contributes to the overall strategic debate concerning Russia which involves the West in general and Europe in particular. I would not overestimate the impact of this proposal, as well as predict its quick and triumphant adoption across the EU.

“What difficulties may arise during the creation of such a union? We are not yet at the stage of its creation. We are at the stage of discussing various options for optimal energy relations between Russia and the EU.

“Nor have I heard such proposals emanating from the German government as well as from the German business community. As long as Germany feels comfortable purchasing Russian gas and using Nord Stream, other EU countries will say that they should be able to develop their relations with Russia as they see fit as well, and, in particular, to develop and build the South Stream. We are just not at the stage where the creation of an economic union would be obviously the right choice to all Europeans.

“I would not write off the South Stream. Some Bulgarian actions are one thing, but Russia’s Gazprom is still strong enough diplomatically and financially to continue its policy. Whether the South Stream, if built, would be cost-effective for Russia and the Europeans alike is another matter.

“Will the new union be able to effectively counteract Russia’s policies? The energy union will not be created to counteract them. If it is created (which I am not sure at all of), it will be designed to ensure the energy security of Europe, and not to fight Gazprom. These are fundamentally different problems. The task of ensuring the energy security of Europe is accomplished by diversifying gas sources and ensuring that these purchases do not cause political problems for the Europeans. For Germany, Gazprom gas purchases do not cause any political problems. Therefore, in the energy union or not, Europe is not envisioning renouncing purchases of Russian gas.”

Interviewed by Ihor SAMOKYSH, The Day