Multiplied by zero

It is two years that Ukraine has been banging its head against the Russian gas wall put up in 2009 not without the efforts of the then Ukrainian government. All the attempts to revise the predatory gas contracts have so far failed. Moreover, the Russian Ambassador to Kyiv, Mikhail Zurabov, thinks that gas negotiations between Ukraine and Russia will not be a topical issue until after the Verkhovna Rada elections and Russia will not make [and, hence, consider? – Author] any proposals on this matter.

At the same time, he told UNIAN that Russia is now far less interested in the joint use of the Ukrainian gas transportation system (GTS). It was a year ago, when this could promote a compromised solution to the problem of gas disputes. “And we can see today that interestedness of the Russian side today seems to differ from its interestedness last October,” the ambassador went on.

The worst thing is that the European Union also shows no great interest in establishing a consortium to manage the Ukrainian GTS – this is the opinion that Yurii Kostenko, MP and head of the Ukrainian People’s Party, recently expressed in his Ukrainska Pravda blog. He notes, ironically enough, that the European Commission President Jose Barroso and the EU High Representative for Foreign Affairs, Catherine Ashton, have highly appreciated the 2009 gas agreements which put an end to the January crisis and “enhanced the transparency of gas relations.” Kostenko recalls that the 2009 agreements set the world’s highest Russian gas prices for Ukraine and a transit price that is two to three times lower than the one for EU countries. In other words, both Russia and the European Union have solved their economic problems at the expense of the Ukrainian pensioner, teacher, and doctor, Kostenko says in indignation. But he also says, fairly enough, that Barroso and Ashton have noted again that the EU’s participation in modernizing the Ukrainian GTS exclusively depends on power sector reforms and Naftohaz restructuring.

Should Ukraine restructure Naftohaz to meet the obligations it assumed when joining the Energy Community? Some mass media related to certain opposition politicians, who adhere to the principle of “individual membership,” are casting doubt on this because, who knows, you might as well be struck off an essentially alien party list unless you remind of yourself from time to time by means of scandalous revelations. Until recently, the latter were mainly based on the fear that the Russian Gazprom would buy the Ukrainian GTS for a song or even get hold of it free.

But, as the above-quoted Ambassador Zurabov said, Russia does not almost need the Ukrainian GTS. So coming to the fore in “sensational materials” is not the monopolist, which has “villainously” given Naftohaz a two-billion-dollar loan to let Ukraine pay an exorbitant gas price, but national oligarchs and even the president himself. It is clear about the oligarchs, but the head of state seems in this case to be fighting against himself for the Ukrainian GTS, for it is more than just a tasty morsel. According to some mysterious and unconfirmed information, this country’s main national asset may be sold into private hands for a negligible amount of 6.5 billion hryvnias and this will involve old time-tested schemes of shadow privatization – from debtor’s prisons to diluted shares.

Moreover, the process is already irreversible: Ukrtranshaz, now the operator and partial owner of the GTS, will turn from a Naftohaz subsidiary into a public joint-stock company with an authorized capital of 6.5 billion hryvnias by the end of this year. Then the reorganization and privatization of Ukrtranshaz will open practically unchecked access to the gas transportation system. Reorganizing Ukrtranshaz into a public joint-stock company will allow oligarchs (most likely, Dmytro Firtash) to establish control – at the abovementioned “nominal charge” – over the entire Ukrainian gas transportation system (plus the underground gas storages) which really costs 10 to 27 billion dollars.

In a word, a grandiose scam is in the offing, with a lot of versions and likely handlers. But, oddly enough, the author does not discuss at all the scenario when neither the European Union, nor Russia, nor its Gazprom will need the GTS. As Kostenko writes, “it is clear that bypass gas pipelines will multiply by a zero the EU’s ‘gas transit relations’ with Ukraine and will boost the Kremlin’s influence on European politics.” Let us not bury our heads in the sand: multiplied by a zero and, therefore, stripped of liquidity, the GTS will be of no need even for Ukrainian oligarchs. Who can determine precisely the time when it can be sold not too cheap? Anyway, this country will not set itself this goal before the law that bans privatization has been repealed and a new law comes into force. But even in this case it cannot be the question of 6.5 billion hryvnias. This figure is either a pre-election provocation or, indeed, the evidence of an oncoming crime which the Prosecutor General’s Office might as well deal with right now.

COMMENTARIES

“UKRTRANSHAZ CAN BE TRANSFERRED INTO THE MANAGEMENT OF A GROUP OF NATIONAL COMPANIES SO THAT NONE OF THE OLIGARCHS GETS AN ADVANTAGE”

Mykhailo HONCHAR, energy program manager, Nomos center:

“It is not yet known whether the GTS will be alienated in the form of privatization. Let us see the example of the company Ukrtransnafta. It has existed as a public limited company since 2001 but still has not been privatized, even though it was struck off the list of facilities banned from privatization in 2008. The company is now in fact controlled by the Privat group, and this status suits everybody. Ukrtranshaz can also be alienated in this way. In other words, Ukrtranshaz may be transferred into the management of a group of national companies so that none of the oligarchs gets an advantage. In this case, the company itself will formally remain part of state property. Why in this way? A new owner of the Ukrainian GTS and full control over the latter is a crucial question for many Ukrainian groups of oligarchs. The GTS is a key to open access to their industrial assets. Therefore, they will not entrust it to just one owner – too high is the price of business interests behind it. At what price it will be sold is a different question. In any case, the company will not reach the peak of its value in the current conditions because it is today a back hole that is sucking in money, while the assets still remain unmodernized. The situation could change if its shares emerged on one of the world spots, but this problem has remained confined to chats about IPO over the past year. In my view, the idea of a consortium does not work either. In addition to being a far outdated idea, it has now been spoiled by the fact that neither the Russian, nor the Ukrainian, nor the European side needs this. A consortium would be of use if there were a guarantee that the entire system will be filled with gas for a long period of time. But in the conditions when Europe opts for the spot market of gas (the Europeans bought half the gas they need on the spot this year), nobody is sure that there will be long-term contracts for Russian gas.”

“MAIN GAS PIPELINES ALONE COST AN ESTIMATED 0 BILLION”

Yurii KOROLCHUK, expert, Institute of Energy Studies:

“A law on pipeline transportation was passed in April, which allows changing the current structure of Ukraine’s gas market or, to be more exact, the form of operational management of the companies that form the structure of the Naftohaz Ukrainy national joint-stock company. This was followed by a decision to gradually turn Ukratranshaz into Ukrhazvydobuvannia. They will be more independent financially, i.e., they will have a possibility to independently borrow money for the modernization of their networks. It is unlikely that the opening will be immediately followed by the privatization of the gas pipelines and gas storages operator because even a tiny percentage of its shares can only be sold by the consent of parliament. Yet everything may happen in the present-day conditions. How much can Ukraine earn on the GTS? It is difficult to assess. Let us take the example of Poland. The owner of the Polish segment of the Yamal – Europe pipeline (about 600 km) charges two million dollars per kilometer of the main gas pipelines. Ukraine has a longer GTS, so the main gas pipelines alone cost an estimated 140 billion dollars. It would be possible to sell the GTS to a consortium of private companies, which includes European players. But what is important here is the participation of Russia because it is a good way to avoid the construction of the South Stream. But I still prefer that the system of main storages should remain the property of Ukraine. In case of adequate management, Ukraine could effectively develop the gas storage system and charge market-based prices for storing gas.”

Interviewed by Natalia BILOUSOVA, The Day