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Posted on Sustainabilitank.info on May 7th, 2014
by Pincas Jawetz (pj@sustainabilitank.info)

 

 

Europe

 

Kiev Struggles to Break Russia’s Grip on Gas Flow.

 

 

Photo

A natural gas worker in Chaslovtsy, the largest transit point in Ukraine for Gazprom exports to the European Union. Credit Joseph Sywenkyj for The New York Times

 

CHASLOVTSY, Ukraine — As Ukraine tries to contain a pro-Russian insurgency convulsing its eastern region, a perhaps more significant struggle for the country hinges on what happens beneath the ground here in a placid woodland in the far west, on the border with Slovakia.

This is where about $20 billion worth of Russian natural gas flows each year through huge underground pipelines to enter Europe after a nearly 3,000-mile journey from Siberia. It is also, the pro-European government in Kiev believes, where Ukraine has a chance to finally break free from the grip of Gazprom, Russia’s state-controlled energy behemoth.

In an effort to do this, Ukraine has for more than a year been pushing hard to start so-called reverse-flow deliveries of gas from Europe via Slovakia to Ukraine, thus blunting repeated Russian threats to turn off the gas tap.

An agreement signed last week between Slovak and Ukrainian pipeline operators opened the way for modest reverse-flow deliveries of gas from Europe, where prices are much lower than those demanded by Gazprom for its direct sales to Ukraine.

But the deal, brokered by the European Union and nudged along by the White House, fell so far short of what Ukraine had been lobbying for that it left a nagging question: Why has it been so difficult to prod tiny Slovakia, a European Union member, to get a technically simple and, for Ukraine and for the credibility of the 28-nation bloc, vitally important venture off the ground?

Some cite legal and technical obstacles, others politics and fear of crossing the Kremlin, but all agree that a major obstacle has been the power and reach of Gazprom, which serves as a potent tool for advancing Russia’s economic and geopolitical interests, and is ultimately beholden to President Vladimir V. Putin.

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Gazprom not only dominates the gas business across the former Soviet Union, but also enjoys considerable clout inside the European Union, which gets roughly a third of its gas imports from Russia and is itself vulnerable to Russian pressure.

Major Gas Lines

Uzhgorod and Chaslovtsy are the most West-Side dots in above map of The UKRAINE.

All the same, a fog of mystery surrounds the reluctance of Slovakia to open up its gas transit corridor — through which Russia pumps a large portion of its gas to Europe — for large reverse-flow deliveries to Ukraine.

Built during the Soviet era to link Siberian gas fields with European markets, Slovak pipelines, according to Ukrainian officials and experts, could move up to 30 billion cubic meters of gas from Europe to Ukraine a year — more than all the gas Ukraine is expected to import from Russia this year.

Instead, the majority state-owned Slovak company that runs the system, Eustream, has offered only a small, long-disused subsidiary pipeline that still needs engineering work before it can carry gas to Ukraine. Once the work is finished in October, Eustream will provide just a tenth of the gas Ukraine has been looking for from Europe. The company says that small amount can be increased sharply later.

Here in Chaslovtsy, in southwestern Ukraine, where technicians from Ukraine’s pipeline company, Ukrtransgaz, and Gazprom monitor the flow of Russian gas into Slovakia, the Ukrainian head of the facility, Vitaly Lukita, said he wondered if gas would ever flow the other way.

“We are all ready here, but I don’t know why the Slovaks are taking so long,” Mr. Lukita said. “Everyone has been talking about this for a very long time, but nothing has happened.”

Andriy Kobolev, the board chairman of Naftogaz, Ukraine’s state gas company, said he was particularly mystified by the recalcitrance of Eustream because in 2011 the company had put forward the idea of using spare capacity in its trunk pipelines for reverse-flow supplies to Ukraine.

He said the Slovaks had rejected this option in recent negotiations, citing secret contracts with Gazprom. He added that he did not know what the problem was exactly, because he had not been allowed to see the contracts.

Eustream executives declined repeated requests for interviews. Vahram Chuguryan, the company’s spokesman, declined to comment on the apparent change of heart or on whether it was related to an ownership shuffle in early 2013, when a group of wealthy Czech and Slovak businesspeople purchased a 49 percent stake in Eustream. At the time, Czech news media speculated that they were acting as a stalking horse for Gazprom.

Daniel Castvaj, a spokesman for Energeticky a Prumyslovy Holding, the company that made the purchase, denied Ukrainian assertions that Eustream has sought to limit reverse-flow deliveries to Ukraine, describing these as “not only untrue but nonsensical” since the pipeline operator, which makes its money off transit fees, has a strong commercial interest in boosting flows regardless of direction.

He said he was unaware of any 2011 offer by Eustream to use the trunk transit system to deliver gas to Ukraine, but added that such an option has always been technically and legally impossible “without the consent of Gazprom,” which has not been given.

European Union officials, frustrated by months of haggling and worried about possible legal problems raised by Gazprom’s contracts with Slovakia, hailed last week’s modest deal as offering at least an end to the logjam. José Manuel Barroso, the president of the European Commission, described it as a “breakthrough” but also called it a “first step,” signaling hope that Slovakia may, over time, allow more substantial reverse-flow deliveries to Ukraine.

Ukraine’s dependence on Gazprom to heat homes and power factories — it buys more than half its supplies from Russia — has not only left the country vulnerable to sudden price changes, which fluctuate depending on whether Moscow wants to punish or favor the authorities in Kiev, but has also helped fuel the rampant corruption that has addled successive Ukrainian governments.

When Gazprom raised the price of gas to Ukraine by 80 percent last month and threatened to cut off supplies if Kiev did not pay up, Ukraine’s interim prime minister, Arseniy P. Yatsenyuk, blasted Moscow for “aggression against Ukraine.”

“Apart from the Russian Army and guns, they decided to use one of the most efficient tools, which are political and economic pressure,” he said.

   Ukraine Crisis in Maps

By pushing to buy the bulk of its gas from Europe instead of from Gazprom and murky middlemen endorsed by Gazprom, Ukraine hopes to protect what it sees as a dangerously exposed flank from Russian attack.

The best-known of those middlemen, the Ukrainian businessman Dmytro Firtash, was detained in Austria in April and has been fighting extradition to the United States.

“Imagine where you’d be today if you were able to tell Russia: Keep your gas,” Vice President Joseph R. Biden Jr. told Ukrainian legislators during a visit to Kiev last month. “It would be a very different world you’d be facing today.”

 

Nearly all the gas Washington and Brussels would like to get moving into Ukraine from Europe originally came from Russia, which pumps gas westward across Ukraine, into Slovakia and then on to customers in Germany and elsewhere. Once the gas is sold, however, Gazprom ceases to be its owner and loses its power to set the terms of its sale.

 

Russia is currently demanding $485 per thousand cubic meters for the gas Ukraine buys directly — instead of the price of $268 it offered the Ukrainian government under President Viktor F. Yanukovych before his ouster — while “Russian” gas sold via Europe, which should be more expensive because of additional transit fees, costs at least $100 per unit less.

Russia denies using gas as a political weapon and says all Ukraine needs to do to secure a stable supply at a reasonable price is pay its bills on time and clear its debts, which Gazprom said total $3.5 billion.

Ukraine has already started taking reverse-flow deliveries from Poland and Hungary. But the quantities, around 2 billion cubic meters last year, have been too small to make much of a difference. Only Slovakia has the pipeline capacity to change the balance of forces.

“We have been struggling for a long time to convince them to find a solution,” said Mr. Kobolev, the Ukrainian gas chief. “We have now identified the problem, which was obvious from the beginning — restrictions placed by Gazprom.”

Ukraine’s energy minister, Yuri Prodan, dismissed Gazprom’s legal and technical arguments as a red herring. “I think the problem is political. We don’t see any real objective obstacles to what we have been proposing,” he said.

Opposition politicians in Slovakia, noting that 51 percent of Eustream belongs to the Slovak state, attribute the pipeline company’s stand to the country’s prime minister, Robert Fico, a center-left leader who has sometimes seemed more in sync with Moscow’s views than those of the European Union.

“Fico thinks that it is necessary to be very nice and polite to Mr. Putin,” Mikulas Dzurinda, a former prime minister of Slovakia, said in a telephone interview. “This is the heritage of old communists in a new era: The big guys are still in Moscow,” he said.

At a news conference in April, Mr. Fico insisted that Slovakia was “really ready” to help assist reverse-flow deliveries to Ukraine. But he added, “We naturally protect our own interests” and will not risk punishment by Gazprom for moves that violate Slovakia’s own deals with the Russian energy giant.

Slovakia depends on Gazprom for around 60 percent of its gas supplies and worries that upsetting the Russian company would lead to higher prices for itself or even cuts in supplies.

Alexander Medvedev, the head of Gazprom’s export arm, said he had no problem in principle with reverse-flow supplies to Ukraine but said such arrangements “require the agreement of all parties involved,” including Gazprom.

“Normally, you can’t arrange a physical reverse flow without a new pipeline,” he added, indicating Gazprom’s opposition to the use of existing Slovak pipelines.

Watching over workers in Chaslovtsy as they laid new underground pipes, Ivan Shayuk, a Ukrainian engineer for Ukrtransgaz, shook his head when asked why the scheme was taking so long.

“What is the problem? The problem is simple — Putin,” he said.

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Hana de Goeij contributed reporting from Prague, and Alison Smale from Berlin.

A version of this article appears in print on May 5, 2014, on page A1 of the New York edition with the headline: Kiev Struggles to Break Russia’s Grip on Gas Flow.

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comment from: orbit7er

Here is another piece of the farce being pushed by the plutocratic elite in denial of the realities of Peak Oil and Climate Change. To ship…

And you know – the comment is right – it is those that refuse to let Europe move away from the use of gas that keep watch the umbilical cord to Russia is not broken. This umbilical cord to an unpredictable Russia is the undoing of the EU, and EU member-States that stand up for to hang on this umbilical cord are the un-doers of Europe.
Strange, as it might seem, Austria may be one of these European States that like Slovakia take real interest in conserving the is. Our eyes opened up Sunday May 2nd thanks to two articles in the Austrian news-papers:

(a)  “A Pipeline that Splits Europe” by Veronika Eschbacher, in the venerable and historic Wiener Zeitung, and

(b)  “How Russia wants to Renew its Might via Gas” by Guenther Strobl in the respected Business pages of Der Standard

Both articles give the facts about the Austrian National Oil Company OEMV, that is in the process of planing with the Russian Gazprom to build a new pipeline – “The Southern Stream” – that will shoot directly under the Black Sea, from Russia’s Caucasus near Socchi, to Bulgaria’s port at Varna. Then from there go directly through Serbia and Hungar to Austria – the town of Baumgarten on the border with Slovakia. The achievement here is that this line does not touvh the Ukraine, Moldova, Poland or Rumania which are inclined to be most reluctant to stay under the Russian boot.

So where in this is the Austria of the very active young Foreign Minister Sebastian Kurz who is laboring at finding an amicable solution in the conflict between The Ukraine and Russia?

Will an Austrian Government that listens to its own Oil Company be so influenced by it that it works against the better interests in Europe – that try to distance themselves from too close relationship with Russia and understand that Energy Independence in Europe means independence of imports of gas – specially if this gas originates in Russia – pipeline A or Pipeline B – there is no inherent difference in this?

The media has yet to explain this, and the politicians running in Austria for the European Parliament have yet to mention it.   Absolutely – not a single politician in Austria has yet had the courage to say that OEMV is not the source of Foreign policy or the guru of futurology and sustainability for Austria, the EU …  for Europe.

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May 5, 2014, at the Wirtschaftsmuseum (the Economy Museum) at Vogelsanggassee 36, 1050 Vienna, Austria, a panel chaired by Dr. Patrick Horvath, included the Editor of the Wiener Zeitung, Mr. Reinhard Goeweil and titled “EU-Elections 2014 – The Role of the Media” gave me the opportunity to raise the importance of the OEMV in Austrian Government policy and the fact that the media just does not point it out. Dr. Horvath, PhD in Social Studies of Communication, is Head of the Union of Scientists dealing with Economic Policy (WIWIPOL) and the panel included as well Mr. Wolfgang Greif (a last minute addition) – Head of the Europe Section at the Employees and the Employers involved in Company Boards and wrote the book on the subject fighting for the right of the Employees to get information about their Companies; Professor Fritz Hausjell of the Vienna University Faculty of Journalism; and Mr. Wolfgang Mitterlehner – Head of Communication at the Viennese Workers’ Union Central Office.

Professor Hausjell pointed out that the Wienner Zeitung is the best provider of information among the Austrian Media and this is something I argue as well, so it made it easier for me to formulate my question by starting with my own congratulation with the paper’s editor right there on the panel. In effect, founded in 1703 under the name “Vienna Diarium” the WZ is worldwide the oldest newspaper still in print(!) (it appears now 5 times a week with Friday and Sunday excluded and carries the official announcements of use in legal Austria); Mr. Goeweil is editor since 2009 and by background a writer on economics.

As excited as I was by the paper’s expose last weekend of the “Southern Stream” pipeline plans intended to keep the Russian gas flowing to Europe under conditions that exclude the Ukraine, Moldova, and Rumania, while using Russian friendly Serbia, and safeguarding the position of Slavic Slovakia – a multibillion project that might become active by 2017, but can kill all development of Renewable Energy in Europe right now, I realized that further involvement in the subject, even by a paper like WZ, will not come as long as even the good people of that paper take for granted the oil lobby arguments that there is not possible to replace the gas because there is not enough sun, wind, hydro-power etc. If nothing else, the Fossil and Nuclear lobbies have numbed the inquisitiveness of even the good media in the EU States, like they did in the US. Why not bring Jigar Shah over here and have him talk of CLIMATE WEALTH?  Why are not more active businesses that stand to flourish ? Are we the only ones to still say YES WE CAN?

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And Vienna is again the Center of Europe!

May 5-6, 2014 the Council of Europe is meeting in Vienna. 30 Foreign Ministers, including those of Russia and the Ukraine, are meeting here under the chairmanship of Mr. Thorbjorn Jagland, the second most popular politician of Norway and a person that has held all possible political positions in Norway and many in all of Europe who is trying to manage the States of all of Europe with the help of the resourceful Austrian Sebastian Kurz.

Norway is not part of the EU and is an outside gas supplier to the EU. Interesting that Mr. Kurz started his meetings on Sunday with meeting first the current Norwegian Foreign Minister – was this a line-up on gas policy? Is that what the New York Times had in mind when publishing their article? Is it all about lining up interests with Russia and Norway so gas continues to flow in those pipelines and The Ukraine pushed aside, isolated and neutralized?

We shall see and so far as Europe is concerned, we will keep a close eye on these developments because in them we see
a make or break not just for the Ukraine but even more important – for the European Energy Policy that some, like the Prime Ministers of Poland and Slovakia, think of as just a gas policy.

 

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