Editor's Note: This Kyiv Post+ article is part of the newspaper's special coverage of Russia's war against Ukraine and the aftermath of the EuroMaidan Revolution.It was originally published by Zerkalo Nedeli and is reprinted with permission.
The trilateral talks among the European Union, Ukraine and Russia have once again been postponed until Sept. 27. This has happened several times since June 16, when Gazprom suspended gas supplies to Naftogaz Ukraine. The state-owned gas monopoly also warned Europe that it should expect disruptions and insufficient supplies of Russian gas because of Ukraine.
The Russian company said Ukraine would not survive the winter without Gazprom’s gas, and that Kyiv will take some of the transit flow meant for Europe, which is why Gazprom has warned that it might halt transit via Ukraine altogether.
Remembering the gas cutoffs in 2009, the European Commission attempted to organize trilateral talks to solve the problem.
In the meantime, Gazprom earlier this month started decreasing gas supplies to Poland and Slovakia, and rerouted some flows to prevent Hungary from supplying gas to Ukraine via the so-called “reverse flow.” Russia’s tactics scared Europe and gas prices went up.
Having created such a depressing atmosphere in the EU gas market, Russia is trying to solve its main problem: to eliminate the Ukrainian gas transportation route in general, just like the Polish one, in order to achieve maximum preferences for North Stream and consent to construct South Stream, without any limitations that apply in Ukraine.
Earlier this month Gazprom failed to react to an increase in demand for gas by Polish operator Gaz System SA for PGNiG and Slovakia. This resulted in a halt of reverse flows from Poland to Ukraine. At the same time, the Slovakian SPP did not receive almost 4 million cubic meters of contracted Russian gas, which is then re-supplied to Ukraine. The gas that comes to Ukraine from German RWE is also supplied through Slovakia. Later, the German E.ON concern and even Austria claimed they had received less gas than they had contracted.
The Russians also made sure to tell the entire world that there is very little gas left in Ukrainian underground reservoirs.
However, Ukraine accumulated the second-largest volume of gas reserves in Europe in its storage. As of Sept. 15, there were 16.3 billion cubic meters of natural gas in Ukrainian underground reservoirs, which is 14 percent or 2.2 billion cubic meters more than the amount during the same period last year. This gas resource will be used for the needs of Ukrainian consumers during the 2014-2015 heating season.
As of today, only Germany has more gas stored in Europe, some 20.1 billion cubic meters. Italy is the third place, with about 15.6 billion cubic meters accumulated.
Yury Vitrenko, advisor to the chairman of the Board of Naftogaz, says all Russian tactics are a part of political and economic pressure on Ukraine and the EU.
Zerkalo Nedeli: What is Ukraine’s take on this situation?
Yury Vitrenko: Gazprom is currently openly pressuring the EU both politically and economically with the aim to prevent gas supplies to Ukraine from Europe. On one hand, they are meeting with government representatives, on the other – they are putting commercial pressure on the market to raise the prices for Ukraine to an unacceptable level. For this, Gazprom is simply limiting the supply on the according market, suspending the transport forces it does not need, preventing gas from flowing freely. The EU found out the reasons for insufficient supplies of Russian gas and realized the reasons for Gazprom’s actions. The shortages are at maximum level set by contracts.
ZN: The proposal of the Russian State Duma to suspend gas transit through Ukrainian territory, is it only emotional, or a frank and well thought-out message not as much to Ukraine as the EU? What may the reaction of the Ukrainian side and the EU be?
YV: To some extent this information campaign is aimed at the domestic Russian electorate. Meanwhile, Russia continues to actively lobby the construction of South Stream. If it is finished and if the EU Commission decides it is possible not to apply Third Energy Packet rules to it, transit through Ukraine will definitely decrease by a significant amount. It is possible that the Russians are testing Europe’s reaction to such a development. So far, the reaction has been negative, and the EU Commission has stated numerous times that they would not support the construction of South Stream. Though we understand that if Russia blackmails Europe in the winter with a decrease or suspension of gas supplies, the Europeans will find it much more difficult to hold on to their current positions.
(Editor’s note: The Third Energy Package includes obligations to give third parties access to gas transportation systems, which seriously impedes Russia’s plans to build a gas pipeline that would avoid Ukrainian territory.)
ZN: EU countries have spent the entire spring and summer accumulating gas to their underground storage facilities without supplying it to Ukraine through reverse flows. However, their supplies will not last long, and they did not pump gas into Ukrainian gas reservoirs. Will there be enough gas on the European market to reverse to Ukraine?
YV: The gas was pumped mainly not by countries, but by commercial companies. The problem was that Gazprom stimulated gas pumping by Hungarian companies, which would prevent supplies to Ukraine. They kept the transit routes from Austria to Hungary busy, and they managed to achieve it (blocking reverse flows to Ukraine). As to the gas resources, unless Gazprom suspends all supplies to Europe, through Yamal, through North Stream, there will be enough gas for us on the European market. The problem is not the lack of gas, but the narrow passages within the gas transportation system of Europe, so called bottlenecks. If Gazprom completely suspends supplies to the European market, the Europeans will have to replace Russian gas with liquefied gas.
ZN: Have any European or U.S. companies voiced their interest in taking part in the management of Ukraine’s gas transit system or the underground reservoirs?
YV: We want to hold an open and fair competition, which means that we should provide all interested parties with equal information around the same time. We will not make agreements with anyone outside of the tender. We are now preparing to hold the competition.
ZN: Can Naftogaz count on liquefied gas? Where would it come from? Europe may ban selling it because it does not have enough for its own needs, and on top of it. it might be too expensive.
YV: Europe cannot ban the sale of liquefied gas. In case there are no Russian gas supplies, the Europeans may make decisions regarding the priority of supplies. However, if there is no extreme cold, there should be no emergencies. We hope that the European market will have the volume we need.
ZN: On Sept. 12, Slovakia said that it cannot technically increase gas reversal to Ukraine, though it has a surplus of gas. The minimal guaranteed volume of reversed gas to Ukraine from Slovakia, starting Oct. 1, will constitute 6.4 billion cubic meters per year (17.6 million cubic meters per day).
YV: Starting October 1, we have booked enough transit capacities for constant supplies of this volume. There are no technical impediments that would prevent importing 27 million cubic meters per day, so using the Slovakian system to its full capacity. We should also take into account that we are buying gas from Western European companies, not Slovakian ones.
ZN: Slovakian Foreign Affairs Minister Miroslav Laicek claimed Slovakia didn’t have enough technical capabilities to supply Ukraine with more reverse gas. He stated this at the Yalta European Strategy forum in Kyiv that there is a surplus of gas, but no surplus of routes. He said the country has to finish building another leg of gas pipeline to, the North-South line, to end Russia’s blackmail. So what sort of technical needs are there to begin major reverse flows to Ukraine?
YV: The major reverse flow is not a physical process, but a contractual and logistical one. The gas flows basically in one direction, and the operators of networks agree among each other who and when receives it. Neither the sender nor the receiver of gas are part of this process. This means that when Gazprom sends gas to Europe and we receive it, neither we nor Gazprom knows what gas reaches Ukraine and where it comes from. We only know when contracted volumes arrive to the point of destination at agreed terms.
ZN: Does this mean that the Kremlin and Gazprom simply killed Slovakia’s intention to supply a lot of gas to Ukraine?
YV: Slovakia does not supply gas to Ukraine, it just provides transportation services.
ZN: Gas reversal to Ukraine from Slovakia started on Sept. 2. In the memorandum signed by Eusteam and Ukrtransgaz on April 28, the so-called big reversal of gas through Slovakia presumes the potential to supply up to 30 billion cubic meters per year. So should we forget about the big reversal?
YV: In the nearest future, we will begin talks with Western European operators regarding the big reversal. Taking into account how unreliable and aggressive Gazprom has been as a partner recently, we are trying to make sure that one of four pipes of the Slovakian line is constantly used for pumping gas to Ukraine.
ZN: What can Ukraine expect from Slovakia?
YV: We expect 27 million cubic meters per day.
ZN: Starting in 2010, Ukraine has been trying to build an LNG terminal. The national project has been discredited, but in August, privately-owned company TIS claimed it planned to build its own LNG terminal. What is the role of private companies in solving the issue of gas import? Is Naftogaz ready to cooperate with them?”
YV: We signed a memorandum with TIS, that we would assist in construction of the terminal, and we’re doing it. The memorandum notes that we will make a joint effort in finding companies which would supply gas to the terminal. So far, Naftogaz knows nothing about any company that would guarantee gas supplies to the terminal. We are looking for them.
