Gas negotiations postponed
3 October 2014 – 11:51am
The date for new Russia-Ukraine-EU negotiations on gas transit from Russia to Europe through Ukraine has not been named. Russian Energy Minister Alexander Novak said earlier that the meeting could be held in Berlin on October 2 or 3. However, it is obvious today that the sides will not start talks before next week.
The previous round held on September 26 was concluded with preparation of a package agreement to settle the gas dispute that needs approval of the Russian, EU and Ukrainian governments. The “winter plan” until the end of March stipulates that Kyiv will pay the gas debt of $3.1 billion and Gazprom will provide Ukraine with 5 billion cubic meters of gas at a price of $385 per thousand cubic meters. Gazprom head Alexey Miller expressed doubts about Ukraine’s ability to pay the gas debt on time.
Vyacheslav Kulagin, the director of the Center for Study of World Energy Markets of the RAS Institute for Energy Research, told Vestnik Kavkaza that Ukraine was ready to buy gas for $385, but some Ukrainian politicians interpreted the $3.1 billion sum the country was required to pay as a pre-payment for the gas. “Although, according to the opinion of the Russian side and European Commissioner for Energy Gunther Oettinger, they agreed that the sum will be a payment for gas already delivered. Consequently, the document is under negotiations between the sides, and the question is what will the Ukrainian side eventually write. In other words, will it write that the payment will be for delivered supplies or will it insist that it will be a prepayment for new gas and does not plan to pay for past supplies,” explained the expert.
Two days ago, Alexander Novak said that Ukraine agreed on prepayments for Russian gas, and the delivery of supplies could start simultaneously with coverage of debts for previous gas supplies. Concerning the sudden readiness of Ukraine for concessions, Kulagin said: “Half a month ago, Arseniy Yatsenyuk said that at least 5 billion was needed to get through the winter, because Ukraine was expecting big problems in winter without Russian gas. Holders were less than half full because there had been no supplies for a long time. There was an economic regime, but the declarations of Kyiv authorities that savings were made from reduction of heated water played little role: the heating season will have supplies for four days. Besides, a very important question is that coal is the traditional gas alternative in Ukraine, but there are big problems with coal too because most mines in the country are idle. It is not possible to mine in some places at all because the main output is in the east, where the combat took place. Mining can be done in some places; huge reserves, about a million tons, are lying in mines for shipping but the railway cannot be used for shipping because of the events in the south-east of Ukraine. Thus, there are big problems with coal too.
Plus, the situation with reverse supplies got complicated because European countries are not only unready to increase supplies, they cannot even provide the volumes available in the summer. Naturally, Ukraine understands this, and it is clear that it needs additional gas volumes, otherwise the country will freeze in the winter, and it will not maintain reliable transit to Europe, and will consequently create problems in this direction, it will violate its obligations.”
“I think the solution offered by Novak is an attempt to find intermediate mutually-acceptable variants. This certainly requires a start of debt payments, because debts are a direct violation of the contract. It is important to note that both sides are expecting a decision by the Stockholm Court of Abitration, which will be final,” added Kulagin.
Regarding the influence of renewal of gas supplies to Ukraine on the fate of South Stream, Kulagin opined that “the two things are interconnected at the moment. The question is probably that it would soften the rhetoric around the Ukrainian issue a little, and probably encourage improvement of the energy dialogue between Russia and Europe. Negotiating other projects, including South Stream, with European partners will probably be easier within the framework of the energy dialogue. However, there are other opinions. One of them says that if everything becomes peaceful, then there will be fewer problems with South Stream. Another opinion is contrary, if the situation in Ukraine becomes more tense, Europe will realize that it should not depend on Ukrainian transit and will give permission for South Stream. Depending on development of the situation, both factors may work out. But here is the key question: if supplies suddenly stall, who will be to blame? Either the Ukrainian side that will demand something Russia will refuse to do, interpreting all deals, contradicting Oettinger, or someone else. A lot will depend on this.”
Two days ago, Alexander Novak said that Ukraine agreed on prepayments for Russian gas, and the delivery of supplies could start simultaneously with coverage of debts for previous gas supplies. Concerning the sudden readiness of Ukraine for concessions, Kulagin said: “Half a month ago, Arseniy Yatsenyuk said that at least 5 billion was needed to get through the winter, because Ukraine was expecting big problems in winter without Russian gas. Holders were less than half full because there had been no supplies for a long time. There was an economic regime, but the declarations of Kyiv authorities that savings were made from reduction of heated water played little role: the heating season will have supplies for four days. Besides, a very important question is that coal is the traditional gas alternative in Ukraine, but there are big problems with coal too because most mines in the country are idle. It is not possible to mine in some places at all because the main output is in the east, where the combat took place. Mining can be done in some places; huge reserves, about a million tons, are lying in mines for shipping but the railway cannot be used for shipping because of the events in the south-east of Ukraine. Thus, there are big problems with coal too.Regarding the influence of renewal of gas supplies to Ukraine on the fate of South Stream, Kulagin opined that “the two things are interconnected at the moment. The question is probably that it would soften the rhetoric around the Ukrainian issue a little, and probably encourage improvement of the energy dialogue between Russia and Europe. Negotiating other projects, including South Stream, with European partners will probably be easier within the framework of the energy dialogue. However, there are other opinions. One of them says that if everything becomes peaceful, then there will be fewer problems with South Stream. Another opinion is contrary, if the situation in Ukraine becomes more tense, Europe will realize that it should not depend on Ukrainian transit and will give permission for South Stream. Depending on development of the situation, both factors may work out. But here is the key question: if supplies suddenly stall, who will be to blame? Either the Ukrainian side that will demand something Russia will refuse to do, interpreting all deals, contradicting Oettinger, or someone else. A lot will depend on thi