On March 12 the head of Gazprom Aleksey Miller and the head of the Ukraine’s Naftogaz Oleh Dubina signed an agreement which provides Ukraine with 49.8 billion cubic metres of gas at USD 179.5 per 1,000 cubic metres for 2008. Naftogaz will buy gas directly at the border and then distribute it among consumers.
This agreement brings to an end the latest row between the two countries that first erupted in the wake of the September 30, 2007, parliamentary election results, which made it likely that Tymoshenko would return at the head of a reforming administration. As a row over unpaid debts and gas fees escalated earlier this month Gasprom cut supplies by 50% and Ukraine responded with warnings about possible problems with gas transit to Europe. The transit bluff appears to have worked, with supplies quickly reinstated. Now both sides have agreed on the gas price for Ukraine and removed one of the middlemen from the Ukrainian market.
New relations without middlemen?
This agreement will see Naftogaz return to a consumer sales market where it has not been active for many years and removes UkrGazEnergo as an intermediary. However, the notorious middleman RosUkrEnergo will still be paid for supplies received in the first two months of 2008. Tymoshenko confirmed that the price for gas supplies in 2008 will be USD 179.5 per cubic metre. She added that gas taken on credit from Russia will be returned to Russia in summer when Ukraine starts to pump Middle-Asian gas.
As part of the deal Gazprom will get to make up some of the losses incurred through the removal of their middlemen by supplying not less than 7.5 billion cubic metres through its affiliated structures to Ukrainian industrial enterprises.
Tymoshenko called the deal a real victory for the government pointing to the fact that Naftogaz will work with Gazprom without the participation of UkrGazEnergo. “It is not just an improvement in the situation, it is absolutely new level of quality,” she emphasised. The destiny of the other middleman, RosUkrEnergo, remains unclear.
Between President and Premier
President Viktor Yushchenko, who has recently been highly critical of the Tymoshenko government’s steps in gas relations with Russia, apparently holds the deal in high regard as well. “I think that the agreement which has been reached represents big progress in the organisation of gas relations and of the removal of those problems which … appeared in gas relations in the beginning of 2008,” he said during a state visit to Belgium.
Tymoshenko’s opponents have accused the Prime Minister of bringing Gazprom directly to the Ukrainian market and state that it could lead to greater dependence on the Russian monopoly. However, Minister of Finance Viktor Pinzenyk said on 1+1 TV channel that Gazprom is present in Ukraine already through UkrGasEnergo, which has until recently dominated gas sales to local consumers.
The EU exerts its influence
Nearly 80% of gas imported from Russia to the EU transits via Ukraine and supplies a dozen EU member states. During her recent visit to Brussels, on March 11, Tymoshenko appeared to play on fears over supplies by assuring European officials that Ukraine would provide the EU with gas transit without fail while also stating Ukraine’s case for greater transparency.
It is not surprising, then, that the EU Gas Coordination Group met in an extraordinary session on March 11, while Tymoshenko was in Brussels, to evaluate the reliability of gas supplies through Ukraine following the dispute and the launch of new negotiations between the two parties. After having ascertained that the European market supply was not affected by the restrictions imposed on Ukraine the committee underlined the importance and the necessity of an urgent clarification of relations between Gazprom and Ukraine as far as domestic Ukrainian gas consumption and gas transit towards the EU is concerned.
“Security of energy supply is one of the key elements of European energy policy. A reliable source of energy is essential for the European economy and for the well being of European citizens”, declared energy commissioner Andris Piebalgs.
