Experts compare gas consortium reestablishment with renunciation of nuclear weapons
More and more factors now prove that Ukraine would rather not press for the establishment of an international gas transport consortium and tie its interests to a plan drawn up in Moscow, for our partners are too keen to follow up on their Chisinau gas victory.
It will be recalled that a little more than a week ago Russian Ambassador to Ukraine Viktor Chernomyrdin urged Ukraine not to delay implementation of the gas consortium agreement, adding that Russia might resuscitate plans to build a bypass gas pipeline. Still earlier, a Russian governmental source said bluntly that, in spite of the Chisinau accords, gas bypass plans had not been shelved at all because it would be illogical for Russia “to put all the eggs into one basket.” Is this not another reason why the process should be speeded up?
This tendency was also confirmed by a unilateral and, as we will show below, somewhat premature announcement last Wednesday of the supposedly sensational news by Russian Gazprom that it had signed with Naftohaz Ukrayiny a package of documents to establish the International Consortium for the Management and Development of Ukraine’s Gas Transport System. Commenting on the agreement reached, the Gazprom press center reported that the two companies would initially contribute $1 million by equal shares to the consortium’s authorized capital. The funds allocated by the founders will kick start the pre-investment research scheduled to be finished by the summer of 2003. The executives of the newly established company will have to draft a feasibility report of the joint investment projects, find a workable pattern of attracting investments in the Ukrainian gas transport system, and present calculations for the expected tax payments to Ukraine’s budget. The joint venture will be registered in Kyiv under Ukrainian law. Representatives of Gazprom and Naftohaz Ukrayiny will hold the first meeting of founders within the next two weeks, at which they will elect a Founders Board and appoint the company’s management. What a pace!
It took Kyiv almost 24 hours to get its breath back after running this feverish negotiating race. At last, on the last day of October, Naftohaz made a statement politely denying Gazprom allegations that the agreement had been signed and offered its own version of the developments: the text, only in Russian, incidentally, was merely coordinated. “The documents were not signed in principle,” the Naftohaz press center told The Day, “Work is, of course, in progress, but we wish the Gazprom press service knew better our and their own realities.” As it turned out, before registering the foundation documents, the consortium founders, Gazprom and Naftohaz Ukrayiny, must go through a number of formalities in their respective countries. For instance, before making a contribution to the consortium’s authorized capital, Gazprom must get a license from the Russian Central Bank to make overseas investments. To become a consortium founder, Naftohaz Ukrayiny must secure permission from this country’s Antimonopoly Committee after furnishing information about all its branches and subsidiaries. This could take several months.
Meanwhile, very few experts promise an easy ride for this document. In particular, People’s Deputy Oleksandr Hudyma is going to take legal action challenging the legitimacy of the gas consortium agreement, while other parliament members are collecting signatures to request the Constitutional Court to interpret the fundamental law’s articles dealing with ratification of international treaties. The pivotal problem is whether the consortium agreement needs to be ratified by the parliament. Among those who doubt the possibility of avoiding the ratification of this agreement is Andriy Kliuyev, chair of the relevant parliamentary committee. But the impression is that the consortium signatories have sidetracked the question of ratification on purpose. As an expert told The Day, if the consortium functions unsatisfactorily or investments do not come in, this kind of approach will allow the Ukrainian gas transport system to get back to its current independent path without excessive formalities.
Apparently, the US side, which does not directly participate in the consortium but is undoubtedly aware of all the likely risks, would also like to see the final shaping of the consortium deferred. “Ukraine must decide by itself what effect it can derive from membership in the consortium,” says US Ambassador to Ukraine Carlos Pascual. In his opinion, one must first find out how the problem of Ukraine’s gas debt to Russia will be addressed within the framework of the consortium, who will be contributing assets to this project, what kind of financial relations and flow of capital this will involve.
If Ukraine thoroughly analyzes these questions, it will have a clear edge over other parties to the project when the talks will start, Ambassador Pascual concluded. Among other things, Ukraine’s gas transit system (GTS), worth an estimated $14 billion, should be valued more properly, with due account of the whole infrastructure — a thing that First Vice Premier Oleh Dubyna mentioned recently. He said the task force that had done a special study concluded that the Ukrainian GTS was “in satisfactory condition.”
Another opinion of the future gas transit consortium was aired by Verkhovna Rada Vice Speaker Oleksandr Zinchenko. He said reform of this country’s gas transit system is the key factor of state energy security. He also noted, however, that the nation’s GTS strategy was highly politicized, with too little attention paid to the legal and purely economic aspects.
Nevertheless, it is difficult to overestimate the political side of the matter. According to The Day’s source close to Naftohaz, the decision to set up the consortium is comparable to Ukraine’s historic decision to renounce nuclear weapons. There is a fear that, as a result, we will lose the only thing that still makes us reckoned with. At the same time, given the correct use of political and economic advantages that the consortium brings, Ukraine will be able to face Europe and the rest of the world in an entirely new guise, that of a civilized and world-integrated state. What will tip the scales?
Experts opt for economic pragmatism in this matter. As Oleksandr Sverdlov, former chairman of the State Oil and Gas Industry Committee and secretary of the interdepartmental task force that is drawing up the concept of Ukraine’s gas transit system, told The Day Ukraine should identify clearly and in detail the conditions of transition to a joint management of its GTS. It should, in particular, take into account the necessity of bringing Central Asian gas to European markets (to this end, Russia is going to lay the Aleksandrov Gai — Novopskov gas pipeline) and of developing the almost-unused segments of the Ukrainian gas pipelines.
