Russia, Ukraine, EU tied by gas dependency
Baku, April 18 (AZERTAC). The need for cooperation over Russia's exports of gas to the EU via Ukraine was an important reason for the tentative peace deal struck in Geneva yesterday. But as Jack D. Sharples writes, gas will also be a source of East-West tensions for a long time to come.
The German energy giant RWE has begun to 'reverse flow' supplies of gas from Europe back to Ukraine via Poland, a process first arranged in 2012, with an agreement to deliver up to 10 billion cubic metres (bcm) of gas per year.
The question for the Ukrainian interim government and state-owned energy firm Naftogaz is how this gas will be delivered, how soon, and whether it will be enough.
Hungary has the capacity to deliver 5.5 bcm, Poland could deliver 1.5 bcm, and Romania could potentially provide 1.8 bcm capacity, but not before 2016-17 at the earliest.
Talks between Ukraine and Slovakia have renewed in an effort to tap into its capacity to deliver 9 bcm of gas, but the Slovak government and pipeline operator Eustream are anxious to ensure that feeding gas back to Ukraine does not breach its contracts with Russian state-owned energy giant Gazprom.
Given that Ukraine imports around half of its annual 55 bcm of gas consumption, even with these new suppliers it will remain dependent on Russian gas.
The current situation comes as Kiev faces price hikes from US$285 to US$485 per thousand cubic metres of Russian gas, after Gazprom cancelled discounts offered in April 2010 and December 2013. The new price is significantly higher than, for example, the price of US$399 paid for Russian gas at the German border.
Naftogaz has struggled to pay for its Russian gas imports since late 2013, and now owes Gazprom more than US$2 billion. The combination of Naftogaz’s debts and unwillingness to pay the higher price means that many in Europe fear a suspension of Russian gas supplies to Ukraine - which, as it travels through the same pipelines, would also interrupt Russia’s gas exports destined for Western Europe.
This is not the first time that Russia and Ukraine have clashed over gas prices. For more than a decade following the collapse of the Soviet Union, Ukraine benefited from Russian gas import prices far lower than those in Western Europe.
Attempts by Gazprom to raise gas prices for Ukraine resulted in disputes and suspensions of gas supplies to Ukraine in January 2006 and January 2009.
With Gazprom delivering 140 bcm to the EU in 2013 - more than a quarter of the EU’s total gas consumption - this has left many countries scrambling to find alternative ways to meet their needs.
Russian gas is delivered to the EU via several routes, of which the Ukraine pipelines are the most important, accounting for 55-60%. Around 25-30% travels through Belarus, and the remainder comes through the new Nord Stream gas pipeline, which runs under the Baltic Sea directly from Russia to Germany.
Other news in this section
