Gas disputes and reduced supply again – Russia v Ukraine 2012 (and the EU)February 4, 2012
For once Ukraine maybe well served by having the current hard-nosed power vertical of the Party of Regions in power.
Why? In the past week, Italy, Poland, Austria, Czech Republic, Bulgaria, Greece, Hungary, Romania and Slovakia have all noticed large drops in the supply of gas from Russia.
Needless to say these drops have occurred when nations like Ukraine, Poland and Bulgaria etc have been on the receiving end of -15C temperatures and more during the last week.
Gazprom’s Alexander Medvedev (yes he is related to the current Russian President) has immediately accused Ukraine of using far more gas than it has been contracted to buy, despite Ukraine only a few weeks ago being lambasted by Gazprom for reducing annual usage to 27 billion cubic meters per year, a figure below the 33 billion cubic meters it was contractually obliged to buy under the awful 10 year deal negotiated by Ms Tymoshenko in 2009.
Now which is it? The breaking of the contract by using less than contractually obliged to do as claimed only 2 or 3 weeks ago by Gazprom, or an incredible 60 billion cubic meters as claimed a few days ago by Gazprom, putting the blame of EU shortfalls on Ukraine over-using gas from the Ukrainian gas transport system?
For once we have a government that has thus far not crumbled to Russian pressure for the past 12 months over all matters gas related to Russia. Ukraine has a government that has not crumbled under immense EU pressure over Ms Tymoshenko either (rightly or wrongly). When the Ukrainian government now claims it is not using any more gas that it is contracted to use, I tend to believe them.
Why do I believe them? Well Poland, who have reported a significant drop in deliveries over the past week via their distributer PGNIG, are not supplied by the Ukrainian gas transport system. PGNIG is supplied by the gas transport system that passes through Belarus over which Ukraine has absolutely no control. In fact the Belorussian gas transport system is now completely owned by Gazprom after the Belorussian government crumbled under Russian pressure only a few months ago.
This seems to be a case where Russia would like to increase the pressure on Ukraine via blaming it in a media war for EU gas delivery shortfalls, despite the obvious fact some nations suffering shortfalls are not supplied via the Ukrainian gas transport system at all.
Quite simply, given the cold snap currently being suffered across Eastern Europe and Eastern European EU members, one can simply expect that demand is far greater than the Russian ability to put sufficient gas into the existing pipelines. It serves Russian purposes to blame the old unreliable transit nation of Ukraine rather than take responsibility itself or declare the system is working at a maximum until new pipelines are built.
Fortunately, the Ukrainian government is not likely to take any responsibility for this and will, one suspects, take a strong position (which they have done already with Russia and the EU over other issues) and stick to their guns very publicly if necessary, denying any wrong-doing. Avoiding populism and being bullied is one thing the current authorities seem to do rather well (much to the annoyance of both Russia and the EU for different reasons).
Whether there will be any need to robustly and publicly deny taking off more gas through the GTS than is contracted for remains to be seen, as it is unlikely the EU will believe such ridiculous Russian claims when some members do not get their gas via the Ukrainian GTS but are still suffering from lack of demanded gas.
Nevertheless, Ukraine must win the media war if there is going to be one and that is going to be very difficult whilst Naftogaz Ukraine remains one of the most notoriously opaque and political of all State owned enterprises. When Ukraine will have a government with the balls to split this behemoth up into separate operating divisions and privatise some or all of them remains anyone’s guess, but it is something that needs to happen just for the sake of transparency that shareholders would demand from any IPO.
One thing is for certain, no Ukrainian official will be rushing to Moscow to sign yet another truly awful gas deal because some EU countries are feeling a little chilly and complaining to Ukrainian authorities about it!