Ukraine needs new Russia gas deal to avoid disruption to EU supply
Published on Wed, 10 Jun 2015 45 times viewed
Bloomberg reported that Ukraine needs to negotiate a new natural-gas deal with Russia just as the conflict between the 2 countries risks escalating again.
A gas-price agreement with Russian exporter OAO Gazprom expires at the end of the month and Ukraine requires fuel to replenish stockpiles before the winter. At the same time, a truce between the government in Kiev and pro-Russian rebels appears to be breaking down after fighting near the eastern city of Donetsk killed more than 20 last week.
Mr Vasily Kashin said at the Center for the Analysis of Strategies and Technologies in Moscow that “Another bloody clash is very possible in the coming weeks as a provocation amid talks on extending sanctions against Russia. That’s a threat for a gas pact.”
Gas has been a key element in Russia’s troubled relationship with Ukraine, which still relies on its larger neighbor for about half of its supply. The issue is also critical to Europe’s energy security as 10% of the region’s gas needs passes through Ukraine’s pipelines.
Mr Alexander Medvedev, Gazprom’s deputy head, said that “While there’s a preliminary gas agreement between Russia, Ukraine and Europe, the final outcome depends on Moscow.”
Mr Alexander Paraschiy, a Concorde Capital analyst in Kiev, said that “Europe may face disruption to supply this winter, similar to 2006 and 2009, if Russia and Ukraine can’t reach a deal.”
Mr Christian Braun, Luxembourg’s ambassador to the 28-nation bloc, said that “Moscow denied Mr Petro Poroshenko’s, Ukrainian President, accusation on June 4th of a full scale Russian invasion in eastern Ukraine. The European Union may extend sanctions against Russia by 1 year in coming days.”
Mr Paraschiy said that Ukraine, battling to meet international debt obligations, would struggle to pay for gas if Russia raises its prices for the country. Alternative supplies from Europe are unlikely to be able to completely fill the gap, especially given Gazprom’s ability to influence flows within Europe.
Gazprom’s Mr Medvedev said in Moscow that Ukraine faces a 16% price jump in the third quarter without a new deal.
Mr Paraschiy said that should the energy dispute escalate, Ukraine might be forced to grab gas that Russia ships through its neighbor’s pipelines to the EU during the coldest winter months.
He said that “If the dispute continues in the heating season, Ukraine would have to take the EU-bound gas. Ukraine needs more gas than last year as its coal stocks are lower.”
According to the Russian Energy Ministry, Ukraine’s state gas company, NAK Naftogaz Ukrainy, had 10.7 billion cubic meter of gas in underground storage last week, while the level should be at least 19 billion cubic meter.
Russia and Ukraine filed claims against each other in international arbitration last year over gas supply and transit contracts in place through 2019 and are waiting for a ruling next year at the earliest. Russia’s state-run Gazprom claims its Ukrainian counterpart owes it USD 29.5 billion, while Naftogaz demands more than USD 16 billion from the Russian company.
Still, Mr Simon Pirani, a senior research fellow at the Oxford Institute for Energy Studies, said that the ability of Ukraine to import gas from Slovakia, coupled with the impact of the economic crisis on demand, means Ukraine may be able to cope without Russian gas, especially if the winter is mild.
Source : Bloomberg