Looks like Russia and the Ukraine are going to repeat the gas crisis of 2009
After two months of unsuccessful negotiations with participation of the European Commission, Russia and the Ukraine are preparing for a new stage of the gas conflict – the restriction of the supply. According to the Kommersant, today Gazprom will switch the Ukraine to prepayment that will create preconditions for the transit of Russian gas to Europe. The situation with the supplies will be extremely aggravated by autumn that still gives the parties a chance to continue their negotiations.
This morning Gazprom is likely to realize its threat of two months standing and will supply only prepaid gas to the Ukraine, several sources familiar with the situation said to the Kommersant. This means that the supplies for the Ukraine will be stopped as Kiev rhas efused to pay any advance payment and Gazprom will continue to supply gas to the Ukrainian gas transportation system (GTS) only for its transit to Europe. According to the Kommersant, a meeting with the participation of Gazprom’s head Alexei Miller will be held at the office of the Prime Minister Dmitry Medvedev in the first half of Monday, during which the transfer to prepayment could be officially announced. The parties had the last chance to reach the agreement last night, when the next round of the negotiations was to take place in Kiev - but its results weren’t known by the time we went to press.
The gas talks between Russia, the Ukraine and the European Commission, initiated by Moscow two months ago, have still not been successful. Their most important achievement became the change of the EC’s position from initially pro-Ukrainian to moderately pro-Russian, and the Ukraine doubled its gas reserves into the underground gas storages.
According to Kiev, the main reasons for the failure of the negotiations is that Russia did not reduced the gas price sufficiently and offered an unacceptable mechanism - through the abolition of the Russian export duty. "We are not satisfied with not only the price, because $385 per 1 thousand cubic meters is too much and it doesn’t make sense to pay more than $350-360 in principle, we can buy gas in Slovakia at this price, - a source in the Ukrainian Ministry of Energy said to the Kommersant. - The main problem is disagreement of Russia to revise the pricing formula, because under option with the duty cancellation, we can lose this discount at any time and become dependent on Russia".
In turn, the Russian side thinks that the level of $385 per 1 thousand cubic meters is adequate, given the fact that the neighboring Poland buys Russian gas even at a little higher price. Moscow was ready to guarantee Kiev that it won’t introduce the duty again during the year, but special indignation of Gazprom was caused by the proposal of Kiev to lift the ban on gas re-export and the condition of take-or-pay: the first one is contrary to commercial logic, and the second - the world practice of concluding long-term contracts. Gazprom was also sceptical about the idea of Kiev to buy gas in Europe through reverse supplies, it noted that this gas is also from Russia. Such schemes are possible as long as Europe has available gas: the monopoly can reduce the supplies to European companies, which cooperate with Naftogaz Ukrainy to the minimum contractual levels that will force them to abandon the reversesupplies in favour of their own consumers.
However, as the Kommersant previously noted, purely commercial disputes were not critical and could be overcome in the case of the general improvement in Russian-Ukrainian relations. According to the Kommersant’s sources, stand of the Ukrainian President Poroshenko on the special-forces raids in the eastern Ukraine was a principle for Moscow, as well as payment of the gas debt accumulated before April 1st. The debt was paid in part (it is still $1.4 billion now), and special-forces raids became more intensive in the last week, disabled Moscow to make further concessions. After a telephone conversation between Vladimir Putin and Petr Poroshenko on last Friday Moscow and Kiev publicly accused each other of blocking the gas talks. They continued on the weekend only at the insistence of the European Commissioner for Energy, Gunther Oettinger. The Kommersant’s sources in the Russian Government believe that the ultimate position of the Ukraine is connected with the influence of the United States, which is trying to prevent the improvement of the relations between Moscow and Kiev.
As a result, the parties returned to the April situation with the only difference: there are not 5.5 billion, and about 14 billion cubic meters of gas in the Ukraine’s storages. "They can stop the supplies, we have time, and we can normally negotiate until September without buying any gas from Russia," - says the Kommersant’s source in Naftogaz, recalling that low summer gas consumption in the Ukraine is almost completely covered by its own production. The Ukraine receives about 8 million cubic meters per day from Poland and Hungary, and expects to receive almost the same amount from Slovakia in October. But the gas consumption in the Ukraine will grow 3.5-4 times in the heating season, and Kiev will have either to agree with Gazprom, or to take gas from the transit flow, which will lead to disruption of the supplies to Europe. "If there are problems with the deliveries to Europe, Russia will again raise the question of the South Stream necessity, so interruptions are beneficial for Gazprom in some sense," - said director of energy programs of "Nomos" Michael Gonchar.
According to agreements with the EU, in case of the threat to the transit Russian shall activate an early warning mechanism: joint groups of experts should be created at the gas metering stations on the eastern and western borders of the Ukraine that will monitor the amount of gas. The main problem can become a "process gas", which is used for compressor stations. According to the Kommersant’s, in summer, it takes about 4.5 million cubic meters per day. If Gazprom stops the supplies, and the Ukraine takes the process gas from transit, it could be a reason for the monopoly to stop the transit too, accusing Naftogaz of stealing gas. Such situation was in January 2009 during the most acute Russian-Ukrainian gas crisis, when the supplies to Europe were interrupted for three weeks.
http://www.kommersant.ru/doc/2492129
Translated by Svetlana Kyrzhaly
