Partner Demands Changing the Attitude

The oil issue dominated the Crimean meeting of Premiers Viktor Yanukovych of Ukraine and Mikhail Kasyanov of Russia. The way the Russian Prime Minister addressed the press conference can be described as nothing but sheer blackmail, tough and rude, with many details that normally either do not find their way into the press or are attributed to anonymous sources. The point is that Moscow is making quite an inexorable demand that Kyiv decide within a month whether or not the Odesa-Brody pipeline will work in a reverse direction, i.e., transferring Russian oil from Brody to Odesa and into the Black Sea. Today, virtually all leading Russian oil companies are demanding this. “The Russian Federation hopes this agreement will cover all the aspects of Russian oil transit, including the use of Ukrainian terminals and pipelines to transport Russian oil in any direction. The Brody-Odesa oil pipeline is one of the important problems being addressed today and can be solved in a month’s time. As soon as this problem is solved, an agreement will be signed,” Interfax-Ukraine quotes the Russian premier as saying. According to Mr. Kasyanov, the Ukrainian side has been studying the Russian proposal about the Odesa-Brody oil pipeline for about two months now, with no decisions made so far. As soon as all the technological and economic aspects of the matter have been reduced to a common denominator, this agreement will be ready for signing. “This is the way we see things,” Prime Minister Kasyanov emphasized.

The agreement in question was to have been signed last Friday by the government delegations of Ukraine and Russia in the Crimea. The draft document, valid for fifteen years, would allow Russian companies to transport up to 79.5 million tons of oil a year across Ukrainian territory. The agreement covered all Ukrainian oil pipelines except the one from Odesa to Brody. The document also allowed both to implement joint projects concerning the transport of oil via future routes and bound them to coordinate annually the quantities, directions, and conditions of transporting oil across Ukraine. The document guaranteed the free and uninterrupted transit of oil by means of both countries’ oil thoroughfares, as well as the safe and trouble-free functioning of all pipelines. Oil transport fees should be set on a non-discriminatory basis for all users of Ukraine’s oil transit system. The Ukrainian side must inform the Russian side in a timely manner about any proposed changes in oil transit tariffs.

However, the agreement was not signed. Mr. Kasyanov told a press conference soon after the bilateral commission had ended its session that the signing could only take place after both sides solved the problem of Russian oil transit via the Odesa-Brody pipeline.

Ukrainian Prime Minister Viktor Yanukovych reacted to his Russian counterpart’s tirade: the Odesa-Brody oil pipeline problem will be dealt with after taking into account all the existing factors. “Taking into account the economic interests of Ukraine and Russia, we will join forces and find a way to promote positive solutions.” Premier Yanukovych also cautiously noted that it is possible in principle to use the Druzhba and Adria pipelines for pumping Russian oil to Novorossiysk

Shortly earlier the Ukrainian government stated it had chosen only one, the European, — direction for the Odesa-Brody pipeline. President Leonid Kuchma has said the same. Even the naked eye can see the powerful pressure brought to bear on Ukraine by Russian oil companies as well the Russian government in the past three months, especially since the European Commission accepted the Odesa-Brody-Plock (Poland) route of Caspian oil transport as a strategic project strategically important for European energy security. Last May the European Commission issued a grant of two million euros to technically support the extension of the Odesa-Brody pipeline to Plock.

The cabinet has announced it is inviting an independent expert to assess the viability of the pipeline’s reverse-mode operation, i.e., pumping Russian oil to Odesa. Kyiv believes that the reverse mode will cost an estimated UAH 500 million, Interfax-Ukraine reports. A number of Russian oil companies (TNK, LUKOil, YUKOS, etc.) have requested the governments of Russia and Ukraine to help implement the project of pumping an annual 9 million tons of oil in the reverse direction.

Pres. Kuchma said last Tuesday, “The Cabinet of Ministers must make a decision that would meet Ukraine’s national interests. The cabinet, not the president!” The head of state added that this should be an economic, not political, decision.

The only problem is that, judging by the pressure on Kyiv, the matter is going to find precisely a political solution. It may be heard quite often in Kyiv that if Ukraine opts for a reverse-mode scenario, “it will be of no use to Europe.”

Should Ukraine, not much of a self-sufficient European actor, choose the reverse-mode option, it will, instead, make a major contribution to the development of Russia. Some partnership.