In a bid to further wean itself off Russian gas dependency, Ukraine on April 28 signed a memorandum with Slovakia for the supply of up to 8 billion cubic meters a year.
Signed in Bratislava, Slovakia, the deal
represents about a quarter of what Ukraine imports from Russia, which
constantly uses the supply of blue fuel as a geopolitical took against Ukraine,
its former colony and Soviet republic that was ruled from Moscow for 70 years.
According to Ukrainian Prime Minister Arseniy Yatsenyuk,
who was present at the signing ceremony, the reverse flow of gas is expected to
be launched between July and November.
The memorandum also stipulates that starting
this autumn, the Voyany-Uzhgorod pipeline will be upgraded to increase capacity
up to 22 million cubic meters daily.
“(Slovak gas transporter) Eustream promised
that in the coming weeks it will examine the technical options for transiting
gas by the Voyany-Uzhgorod pipeline in order to accelerate the launch of
reverse flow and increase supply,” the company said, according to
Interfax-Ukraine.
In turn, Ukraine’s gas transit company, Ukrtransgaz,
also offered to sign an agreement with Eustream to merge the neighboring gas
transportation systems.
Welcoming the successful conclusion of the
negotiation, European Commission President Jose Manuel Barroso said that the
agreement is “the first and important step towards the diversification of
Ukrainian gas sources, which will also help to increase energy security in
Eastern Europe and in the whole of the European Union.”
Four gas pipelines
connect Ukraine and Slovakia, which have a combined throughput capacity of 90
billion cubic meters, while Ukraine has a total throughput capacity to Europe
of 142.5 billion. Slovakia has a 50 billion cubic meter contract with Gazprom
for sale to Europe at stake.
According to Standard Bank analyst Timothy Ash,
the agreement is a step in the right direction, but it will only be a drop in
the ocean compared to what Ukraine needs to import from Russia. “I think the
Slovaks were worried here in over unduly irritating Moscow and existing gas
supply contracts. The Slovak prime minister has been keen to stress that
Ukraine could end up importing 16-17 billion cubic meters via Poland, Hungary
and Slovakia – i.e. safety in numbers.”
Ukraine is highly dependent on importing gas
from Russia to the tune of around 30 billion cubic meters per year of the 50
billion cubic meters it normally consumes. Until this year, the price the
Russians were charging was cheaper than what Europe could offer.
However, in early April Russia decided to raise
the gas price for Ukraine from $285 per thousand cubic meters to $485, with the
justification that a 2010 deal signed with disgraced ex-President Viktor
Yanukovych that gave a $100 discount and the Dec. 17, 2013 agreement with him that
gave an additional $100 rebate had become null and void.
In 2013 Ukraine imported an estimated 2 billion
cubic meters of gas from Europe for an average of $400 per thousand cubic
meters.
Russian pressure mounting
On April 28, the Ukrainian government decided
to give Gazprom 30 days to settle its debt claims with
Ukraine; otherwise, it will sue in a court in Stockholm, Yatsenyuk announced. “We
have sent several messages to Gazprom that Ukraine is ready to pay $268.50 per thousand
cubic meters, and if Russia agrees to this price and extends the contract,
Ukraine will immediately pay its debt to Gazprom,” said Yatsenyuk.
Russian President Vladimir Putin has been
ramping up the energy security pressure on Ukraine. On April 9 he suggested
that the Russian gas giant Gazprom begin collecting pre-payments from the
Ukrainian side before transiting gas to its southern neighbor. Then, in
addition to a $2.2 billion bill from Russia for gas Ukraine consumed in
February-March, Gazprom on April 24 announced that Ukraine’s state-owned oil
and gas monopoly Naftogaz owed it an additional $11.4 billion because the
company was supposed to take 41.6 billion cubic meters of gas in 2013, but only
took 12.9 billion. So, it must incur a penalty on the grounds that the 2009
contract contains a “take-or-pay” clause, which obliges Ukraine to buy a
specified volume of gas, whether it needs it or not. Ukraine presumably
plans to challenge the take-or-pay cause as part of its impending lawsuit in
the Stockholm Court of Arbitration.
Ukraine’s Energy & Coal Industry Ministry,
however, says that in fact Ukraine took 28.1 billion cubic meters of gas from Russia.
On April 25 Russian President Vladimir Putin and
German Chancellor Angela Merkel during a telephone conversation expressed their
desire to hold gas talks as early as May with representatives of the Russian
Federation, EU and Ukraine, reports Dzerkalo Tyzhnya. The telephone
conversation was reportedly initiated by the German side.
Kyiv Post business
journalist Evan Ostryzniuk can be reached at [email protected].
