G8 to arbitrate?

The fighting spirit that was evoked by the Orange Revolution and then spread to the field of Ukraine-Russia gas relations by the two last governments of Ukraine has finally fizzled out. Such a conclusion may be drawn from the statement issued by Ivan Plachkov, Minister for Fuel and Energy of Ukraine, who announced that Naftohaz Ukrainy and Gazprom do not consider it necessary to revise the price clauses of the contracts on gas supplies in 2006, signed with Turkmengaz.

This result of the Moscow talks between the Ukrainian minister and Naftohaz chairman Oleksandr Bolkisiev, and the chairman of the Gazprom board of directors, Aleksei Miller, may be viewed as evidence of an alliance of the two countries’ gas departments against Turkmenistan. But will this benefit Ukraine, when it is facing Moscow’s dictates? Experts believe that with long-term interests in mind, our country should do its best to strengthen relations via concessions with Ashkhabad, a guarantor of competition in the Ukrainian gas market.

But a lame-duck government can, by definition, pursue expedient interests only. RosUkrEnergo’s promise to keep the gas price at $95 in the third quarter suits it very well, but it apparently has never wondered what led to this unexpected charity. The answer is simple: Russia does not want to discredit itself in the eyes of Europe and the world on the very eve of the G8 summit. Thereafter, it will act according to its plan.

Plachkov, supposedly a powerful negotiator, and Bolkisiev, a rank novice in this field, also looked lackluster at the meeting of the supervisory board of UkrHazEnerho Ltd. (a joint venture of Naftohaz Ukrayiny and RosUkrEnergo) which for some reason was held in Moscow. A source close to Gazprom described the session darkly: he said it ended in a total fiasco.

“In fact the question was: when will Naftohaz begin concluding the contracts and paying money?” the source said. No decision was taken because the Ukrainian side failed to give a convincing guarantee that it will pay off its nearly $500-million debt. In other words, Gazprom called Plachkov and Bolkisev on the carpet and gave them a dressing down. According to Gazprom’s press service, last Thursday Plachkov and Bolkisev also held talks with Miller.

“At the Ukrainian side’s suggestion, the negotiators also discussed the resumption of work of the International Consortium for Managing and Developing the Gas Transit System of Ukraine. It was decided to hold a consortium meeting in the nearest future,” the Gazprom press release states. Is our side going to throw in the towel? We were proud of the fact that, as the January gas crisis was resolved, Ukraine had managed to retain its gas transit system, a guarantee of our economic independence.

Will there be new attempts to take it over bit by bit or the whole thing at once? While Naftohaz owes RosUkrEnergo $382 million, the latter’s net profit in 2005 was $740 million. What and who helped it generate such a profit in the first year of operations on the Ukrainian market? And should we be glad that 50 percent of the profits belong to the Ukrainian businessmen Dmytro Firtash and Ivan Fursin, and, perhaps even more, to those who stand behind them? (Nobody in Ukraine knows exactly who the latter are, just as no one in the Ukrainian leadership, law-enforcement bodies, intelligence and counterintelligence service, which seem to devour taxpayers’ enormous money to little avail, knew about the two above-mentioned “good guys” until the US company Price Waterhouse Coopers outed them.)

On the very eve of the G8 summit in St. Petersburg, where energy security is on the agenda, Ukraine, no thanks to its leadership, is being presented to the world community in a bad light.

Look at the glee with which Russian President Vladimir Putin told his citizens and the whole world during his Internet conference about the Ukrainian-Russian gas dispute, “I am pleased. We are doing our best! We have put energy security on the agenda.” Putin emphasized that prior to this conflict European consumers had been extremely dependent on the agreements between Russia and Ukraine.

“Now we have agreed to separate these two issues (a gas price for Ukraine and tariff on the transit of Russian gas across the territory of Ukraine - Author). If Ukraine meets its commitments, it will be obliged to keep an uninterrupted supply of gas to European consumers for a long time,” said Putin with satisfaction. He even praised the Ukrainian leadership, “They have taken a correct and courageous step.”

At the same time, he portrayed our country as a small-time thief. “We were not the ones who began to reduce supplies of our gas to European consumers. It was our Ukrainian partners who began to unlawfully siphon the gas off the export pipeline.” But now, in the Russian president’s view, everything is OK.

Has the Ukrainian leadership prepared a response to these statements and its proposals to the G8 and the world public about strengthening energy security? We don’t seem to be much concerned about this. The government is actually on its last legs. The president is concerned about the next elections, which now looks like his battle cry on the parliamentary coalition-forming field. He has forgotten about the economy, while a different country is trumpeting mightily, albeit with some falseness, into the ears of the G8 whose members are going to act as arbiters.