Gas as a political weapon. Is Russia up to new tricks? 

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2014/10/30 • Economy

Article by: Yana Polyanska

Trilateral gas talks are approaching their end: Ukraine and Russia agreed on the gas prices and are preparing to sign the appropriate agreement on Thursday night. Prime Minister Arseniy Yatseniuk said at the government assembly that before New Year Ukraine will buy Russian gas for 378 USD per thousand cubic meters. Besides, the European Union will guarantee that Russia will not raise the price in spite of the agreements. However, energy experts doubt that the gas agreement will be signed in the nearest days. According to them, gas is not an economic but a political weapon which Russia would want to hold on to before the winter cold sets in. 

Ukraine will have Russian gas, stated Prime Minister Arseniy Yatseniuk when announcing the signing of the trilateral gas agreement in Brussels. According to the Prime Minister, before the New Year, the government will buy gas from Russia at a price of 378 USD per thousand cubic meters. In the first quarter of 2015, it will be 13 USD cheaper because of the decrease in oil prices. Yatseniuk noted that this agreement is temporary, as the final decision regarding the gas contract will be made by the Stockholm Court.

Yatseniuk promises to pay 268 USD per thousand cubic meters for the Russian gas Ukraine had pumped in earlier.

“If Russia violates the price formation order and once again tries to establish the price at 500 USD, as was proposed initially, the EU Commission will practically guarantee that Russia does its duty following a fair price,” Yatseniuk added.

Russia will first demand the gas debt be repaid

Russia, on its part, also demands guarantees. In particular, Russian Minister for Energy Alexandr Novak stated at a government assembly that Ukraine will have Russian gas when it accords financial guarantees for Russian gas and when it is able to provide advance payments.

He also emphasizes that the accorded price on Russian gas already includes a 100 dollar discount, which will be in effect until the end of March of the following year. According to him, it is a gesture of help towards the neighboring country which is going through hardships.

“This is the same discount that was in effect in the previous periods of our relations with Ukraine. In principle, this is an investment of the Russian side in the situation which has to do with regulating the gas conflict. And overall, it is an investment into Ukraine’s economy,” Novak noted.

Besides, he demands that the debt for the gas that had been pumped in earlier be repaid. Russia made calculations and in the nearest future they expect Ukraine to pay almost 1,5 billion USD. Additionally, Ukraine has to pay almost the same sum of money before the New Year, Novak says.

Yatseniuk claims: Ukrainian accounts have the necessary sum in the shape of assistance from the International Monetary Fund and the European Union, therefore the debt can be paid back with no problem.

European partners push Ukraine and Russia to agree on gas

Gas talks in Brussels which began on Wednesday, October 29, will last until late on Thursday night. However, energy experts doubt that the trilateral agreement will be signed in the foreseeable future. In particular, they are concerned by the position German Chancellor Angela Merkel has taken in the issue, who, by maneuvering words, pushes Ukraine to agree with Russia about gas supplies in the winter, for transit of gas to EU countries not to end up in jeopardy.

Besides, the experts are concerned by the fact that the Chairman of the Board of Russian Gazprom Alexey Miller suddenly departed for Moscow from Brussels on Thursday – it is possible, he is according additional agreements.

According to expert Bohdan Sokolovsky, the trilateral agreement will be signed only if gas “is ripped out the context of Russian schemes.” However, if Russia plans to further use heat in Ukrainian homes as an instrument of pressure, the talks will last longer, he says.

“As of today we hear nothing from our Minister who is there. We hear everything from the EU or Russia. I would say I trust the EU, however, I would like to hear our minister first,” says he.

Expert: Ukraine really does need Russian gas

Energy expert Volodymyr Saprykin also thinks that the agreement will not be signed in the nearest future, as the Russian side “extends the talks and delays the signing of the documents, as its goal does not lie in economic pressure.” According to him, the neighboring country wants to show that Ukraine is currently engaging in incorrect (in its opinion) policies, therefore it is even unable to provide heating to the people. Saprykin predicts that the documents will be signed closer to New Year’s Eve.

“Almost always Gazprom and Russia delay the talks until the beginning of real cold. They think that Ukraine will then agree to any conditions,” he says.

Saprykin adds that Russia may further speculate on the issue of debt and make new demands. However, the expert is convinced that Ukraine really does need Russian gas, as reverse gas, even at maximum capacity, will be unable to fully replace Russian fuel. If the states do not come to an agreement, says Saprykin, Ukraine will have a deficit of 5-10 billion cubic meters of gas, as well as no heating at big factories.

Translated by: Mariya Shcherbinina
Source: Radio Liberty

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  • Mykola Banderachuk

    lets cut to the chase, russia will screw around in these gas negotiations, make propaganda points, deal and no deal, deal and no deal. BUT in the end they will not agree to anything and therefore will not send gas to Ukraine this winter.The russians are nasty and want Ukraine to get none of their gas this winter. pure and simple. This will just harden Ukraine in this war so that in the end Ukraine will not buy ever again any russian gas.

  • Paul P. Valtos

    Well the world has much experience with Russian promises. What they know as the truth has been twisted so many times black becomes white and viceversa. There must be a special construction of grammer in Russian to hide truth.

  • ShoutTheTruth

    In the end Russia is going to use gas as a weapon against Ukraine and Europe. A delayed agreement is really no agreement.

  • Ilja Sigford

    It’s quite bizzare when you realize how many disputes concerning natural gas Russia and Ukraine have had, here’s a brief history of how it started:

    http://www.energypoliticsreview.org/russo-ukraine-gas-disputes/

    Even though Ukraine really does need Russian gas, policy makers should concentrate on searching Russian natural gas transit diversification opportunities. Russia needs Ukraine’s transit corridors as much as Ukraine needs Russian gas. Working on alternative transit routes would even the current relationship concerning natural gas.