It’s a 10-year gas deal with Russia’s Gazprom, with a 20 percent discount, gas price pegged to oil, and take-or-pay obligations attached. For Ukrainians, this reads like déjà vu from 2009, when the nation’s then Prime Minister Yulia Tymoshenko signed a deal to import Russian gas under these conditions.
But this is 2012, and these are some of the
parameters of a brand new deal signed by Bulgaria on Nov. 15, along with an
agreement to take part in South Stream, an ambitious gas supply project
pioneered by Russia to diversify its supply routes to Europe and bypass Ukraine
along the way.
The most striking difference between the two
contracts (so far) is that in Ukraine, Tymoshenko is now in prison serving a
seven-year sentence for abuse of office for signing this deal
By contrast, in Bulgaria, Dimitar Gogov, chief
executive of state-owned gas supplier Bulgargaz, was reported by United Press
International as saying that the new deal will bring Russian gas to end consumers
at least 5-7 percent cheaper than current prices. He said the biggest winners
in the deal would by the country’s industrial users.
South Stream is designed to deliver Russian gas
to the countries of Central and South Eastern Europe, and includes a 900 kilometer
underwater gas pipeline through the Black Sea that is currently being planned
by South Stream Transport, an international consortium of four major energy
companies: OAO Gazprom (Russia), Eni
S.p.A. (Italy), EDF (France) and Wintershall Holding GmbH (BASF
Group) (Germany).
When fully operational, the gas pipeline should
be supplying up to 63 billion cubic meters of gas per year to European
consumers and industries – approximately 10 percent of the European Union’s
estimated total gas consumption in 2020, according to the South Stream
project’s website.
The Bulgarian section of the pipeline, which
will run through Serbia, Hungary, Slovenia and northern Italy with offshoots
potentially to Greece, Croatia, Montenegro and Macedonia, will be 540
kilometers (335 miles) long and will cost 3.3 billion euros ($4.2 billion),
according to Bloomberg. Bulgaria will borrow money from Russia to finance the
construction, at undisclosed terms.
Bulgaria was one of the last countries involved
in South Stream to sign up to the deal at the end of last week. The Financial
Times reported that it appeared to be holding out on signing up to South Stream
in the hope of bargaining for a lower gas price, but Gazprom officials denied
there was any connection between the two.
Bulgaria pays the Russian monopoly
$520 per 1,000 cubic meters of gas at the moment, according to UPI. Ukraine, in
comparison, pays $430 per 1,000 cubic meters, and this price includes $100
discount the nation received in 2010 by signing an additional agreement
extending the term of Russian Black Sea Fleet’s presence in Sevastopol, Crimea,
in exchange for gas discounts.
Under the new deal, Bulgaria will have to buy
2.9 billion cubic meters of gas from Russian per year, according to a Gazprom
statement on the deal. The new contract also imposes an 80 percent take-or-pay
obligation, Bulgaria’s Energy and Economy Minister Delyan Dobreb was quoted as
saying. Similarly, when Ukraine signed its own deal with Gazprom in 2009, it
has an 80 percent take-or-pay clause in it. The contracted volume under
agreement is 52 billion cubic meters of gas per year. But Energy Minister Yuriy
Boyko said over the weekend that Ukraine will only buy 27 billion cubic meters
of gas next year, and is prepared to go to international courts if Russia
claims fines.
There are some visible differences in the
contracts, too. Bulgaria will have an opportunity to renegotiate the price and
the quantity of gas supplies after the sixth year of the contract, the Sofia
News Agency’s Novinite.com website reported. Ukraine, however, has been trying
to unsuccessfully to renegotiate its deal for years. It has received plenty of
hints from Russian leadership that its attempts would be more successful should
the nation agree to join the Russia-led Customs Union. So far, Ukraine has
resisted. Many analysts believe that Russia’s push for the development of South
Stream and other alternative routes are partially dictated by its desire to
reign in Ukraine.
Blackmail would be nothing new in Russia’s gas
negotiations. In 2009, the infamous gas deal was signed amid a major crisis,
which resulted from Russia’s cut of supplies to Europe through the Ukrainian
pipeline in the depth of winter. By the time Tymoshenko went to Moscow to enter
negotiations on the new gas import deal on Jan. 18, Europe was cut off for more
than two weeks, and Ukraine’s reputation as a transit nation was suffering a
vast blow.
In Bulgaria, at least some of the
same tactics seem to have been used. EurActiv news agency reported that a verbatim transcript of a Bulgarian cabinet meeting held
on 7 November showed that that Bulgaria would pay Gazprom a heavy
fine if it failed to sign a final investment decision to build the South Stream
gas pipeline on its territory by Nov. 15.
Gazprom chief executive officer Alexey Miller,
in his statement on Gazprom’s website, said that the new agreement on South
Stream with Bulgaria “is our common success.” Similarly, in 2009, both
Tymoshenko and then-Prime Minister Vladimir Putin praised their bilateral agreement
as a new breakthrough. Years on, it remains a bone of contention not only
within the nation, but in its relations with Russia.
Kyiv Post editor Katya
Gorchinskaya can be reached at [email protected].
