Russia Suspected of Trying to Take over Ukraine’s Gas Transit Network

Russia was supposed to resume pumping gas to the EU through Ukraine on January 13 following trilateral Moscow-Kyiv-Brussels talks, but the Russia-Ukraine gas row is far from over. Neither the issue of Kyiv’s debts, the very existence of which Ukraine denies, nor the conditions of gas supply to Ukraine in 2009 have been clarified. There are fears in Kyiv that Moscow wants to take control of Ukraine’s gas transport network. Meanwhile, Ukrainian industry, heavily reliant on gas, is grinding to a halt; and people are freezing in their homes in subzero temperatures.

Russia stopped delivering gas to Ukraine on January 1 in the absence of contracts for 2009; and it stopped gas transit through Ukraine on January 7, accusing Ukraine of siphoning off gas bound for Europe. Ukraine’s gas monopoly Naftohaz Ukrainy admitted that it had been withdrawing 20 to 25 million square meters of gas from the pipelines a day in order to keep up pressure in the pipe needed to pump gas to the EU. Gazprom agreed to resume gas transit only if inspectors representing the European Union, Russia, and Ukraine could verify that no gas was being siphoned off (Kommersant Ukraine, January 12).

A protocol stipulating the conditions of checking the pipelines in Ukraine was signed by the three parties from January 10 to 12 with the mediation of Czech Prime Minister Mirek Topolanek, who traveled between Moscow, Kyiv, and Brussels (Interfax, January 10-12). Ukrainian Prime Minister Yulia Tymoshenko tried to attach to the protocol a declaration that essentially shifted all the blame for gas transit disruptions on Russia saying that Ukraine did not steal Russian gas and that it had been a reliable partner in gas trade. This angered Moscow. It accepted the protocol only when Tymoshenko backtracked, saying that the declaration was unrelated to the protocol (UNIAN, January 12).

Although gas deliveries to the EU are about to resume, it is too early for the EU consumers of Russian gas to sigh with relief. Russian President Dmitry Medvedev warned that transit through Ukraine might be halted again if Ukraine resumed “stealing” gas (Interfax, January 11). Ukraine has never admitted to “stealing,” and it is still not clear which side will pay for the “technological” gas that Ukraine uses to maintain pressure in the pipelines. In the absence of contracts between Ukraine and Russia, new disruptions to the gas transit cannot be ruled out.

Russia insists that Ukraine owes $600 million for gas delivered in 2008, and Gazprom wants Ukraine to reimburse $800 million that it lost because of the transit halt (Ekho Moskvy, January 12). But the issue of the gas price for 2009 remains the thorniest. According to Kommersant, Ukraine has agreed to pay $250 per 1,000 square meters of gas, a price Gazprom offered at the end of December and Naftohaz rejected; but Moscow now wants “the market price” of $450, something that Kyiv simply cannot afford (Kommersant Ukraine, January 13).

It is also not clear from whom Ukraine will be buying gas. Tymoshenko insists on dropping RosUkrEnergo, a joint venture between Gazprom and Ukrainian businessman Dmytro Firtash, as middleman, a role it has been playing since early 2006. Both Ukrainian President Viktor Yushchenko and Russian Prime Minister Vladimir Putin reportedly share this position. Firtash said in a recent interview that RosUkrEnergo’s removal from the Russia-Ukraine trade would be no tragedy for him as RosUkrEnergo’s mediation, according to him, amounted to subsidizing Ukraine (Vedomosti, January 11). Russia stated on earlier occasions that Ukraine would have to pay much more than the $179.50 that it was paying in 2008, if RosUkrEnergo’s mediation is dropped.

Russia is seemingly in a strong position in the price talks. Tymoshenko maintains that Ukraine’s gas storage and its own extraction will suffice for more than just surviving the winter without new contracts. This appears to be mere bluffing. Disruptions to hot water and the heating supply to households have been reported from eastern and southern Ukraine and Kyiv (Ukrainska Pravda, January 9, 11). Naftohaz Deputy CEO Volodymyr Trikolych admitted that Ukraine’s chemical industry had halved its gas consumption (UNIAN, January 8). The Sievierodonetsk-based Azot, one of Ukraine’s biggest chemical factories, stopped production (UNIAN, January 9).

It is feared in the Yushchenko administration that the gas row may result in Ukraine losing the gas transit network, which is probably the country’s most lucrative asset. Putin said in a recent interview that Russia was not against taking part in the network’s privatization (Interfax, January 11). The head of Yushchenko’s office, Viktor Baloha, accused Russia of “blackmailing” Ukraine in order to grab the network. According to Baloha, if Kyiv did not agree to Moscow’s conditions, Moscow expected an uprising against Yushchenko in the industrial east prompted by a stoppage of the local industry and freezing cold in homes as a result of the absence of gas (Ukrainska Pravda, January 10). Ukrainian laws forbid the network’s privatization.