It turned out, who lost in the Ukrainian-Russian gas dispute

Выяснилось, кто проиграл в украинско-российском газовом споре

© AFP 2019 / Genya Savilov
Russia offers Ukraine to return to direct supply of gas, “because it directly affects the volume of its transit,” said yesterday the head of the energy Ministry of Russia Alexander Novak. Previously, as you know, Ukraine has formally stopped buying Russian gas and start to pay for “reverse supply from Europe” — which, however, existed only on paper.It is only the last act aggravated in the recent gas negotiations.We will remind: on Monday, November 18, it became known that the JSC “Gazprom” sent “Naftogaz of Ukraine” the official offer signed by the Chairman of the Board Alexey Miller on the renewal of the existing contract or concluding a new agreement on transit of blue fuel through the territory of Ukraine for a period of one year taking into account the forecasted demand of European buyers for gas in 2020.Of course, the proposal furnished a number of conditions:— failure of both parties from all mutual claims in the international arbitration and the termination of all judicial proceedings;— cancellation of the decision of the Antimonopoly Committee of Ukraine on imposing on “Gazprom” penalty for alleged “violation of economic competition”;— the review of the application of “Naftogaz of Ukraine” about the initiation of a European Commission investigation against a Russian company.
With high probability these conditions will not be accepted by the Ukrainian side, and at least in January transit of gas through Ukraine may be interrupted. This is evidenced not only bellicose statements by leaders of “Naftogaz” and delaying the process of his unbundling (separation), which the Ukrainian side has undertaken to hold until 2020. Talking about it also and calculations, OOO “the Operator of the Ukrainian gas transportation system” of tariffs for services of gas transportation, which is made on the basis of the zero transit scenario.The two main of the head of “Naftogaz” Andrey Kobelev and Yuri Vitrenko largely differ from each other (for example, the first withdrawal of money received as a prize for the “Peremoga” over “Gazprom” for mom in USA, Maryland, and the second to his wife in Liechtenstein) and sometimes have different interests. But they’re definitely like-minded in order to prevent even the possibility of a global agreement with “Gazprom”.Then matched everything from the interests of their overseas curators and opportunities to capitalize on the purchase of Russian gas to the Europeans unwillingness to tolerate even the theoretical possibility of the return of premiums received (from KOBOLEV is almost half a billion rubles, at Vitrenko a little less) in case of refusal from attempts of recoveries from “Gazprom” the decision of the Stockholm arbitration.And the fact that the new Ukrainian authorities are unable to change the leadership of “Naftogaz”, is also quite eloquent.In addition, the refusal of mutual claims, from the point of view of the heads of “Naftogaz” is based solely on the refusal of the Ukrainian side to recover $ 2.6 billion by the decision of the Stockholm arbitration and to continue the controversy on other claims totaling $ 12 billion without a similar failure on the Russian side. Gazprom in return offers direct deliveries of gas and reduced prices by 25 percent. However, in the circumstances, “Naftogaz” seems more like it to make money on expensive gas from intermediaries than to directly cheap.
Plus there is the penalty of the Antimonopoly Committee of Ukraine in the amount of 172 billion, imposed on “Gazprom”. How would this penalty nor was absurd (after all, “Gazprom” did not even keep the economic activity in Ukraine), de facto it is confirmed at the level of the Kiev economic court of appeal. He referred to the collection of the Executive office, and even in the procedures for its cancellation — continuous questions.Also, Ukraine is not a short-term agreement on the transit, knowing that after full commissioning of the “Nord stream — 2” of its position deteriorate significantly. At the same time, while not entirely clear, as can be concluded long-term contract, since the procedure of separation of “Naftogaz” has not been completed and, in fact, the future operator of the gas transportation system of Ukraine — JSC “Backbone system of Ukraine” exists only on paper.This all should add information on the pump in Ukraine, which does not imply any compromise with Gazprom, because it would be perceived by the electorate, which five years were brainwashed as a total “zrada”.Finally, it is worth to note that side as he could, prepared to force majeure, with the possible termination of transit: underground gas storage in Ukraine’s accumulated record in recent years of gas reserves. Similarly, Gazprom laid the record volumes in the European stores.In other words, the whole set of legal, technical, political and other circumstances leads to the fact that on 1 January, the transit of Russian gas through Ukraine will stop.There are certain hopes for the meeting in the “Normandy format” which may take place until mid-December. But given the above-described circumstances to rely too much on it, probably not worth it.In “Naftogaz”, apparently, come from the same.Recently it became known immediately about the two variants of increase of tariffs for transportation of gas from 2020.First of JSC “Ukrtransgaz”, calculated without regard to force majeure — that is, on the basis of the continuation of the provision of transit of Russian gas. However, it is unclear to what extent.Second, from the “daughter” of JSC “Ukrtransgaz” — OOO “the Operator of Ukraine’s GTS” (this company after unbundling from January 1, 2020 must be transferred to the management of JSC “Backbone system of Ukraine”) — calculated from the zero transit scenario.
And I must say that both options look very grim for consumers.The first involves increasing an average of more than twice the rate for transportation of gas through Ukraine and almost two times for entry points to the GTS of Ukraine in transportation of imported gas.The second involves the increase of the tariff for transporting gas through Ukraine 3.5-4.7 times. The tariff for entry points to the GTS of Ukraine in transportation of imported gas will rise at 2.7-2.8 times. Due to the lack of transit is clearly talking about the purchase of gas on the Western border of Ukraine. And purchase are now no longer virtual, but real gas from European storage facilities and pipes, which will be unknown how much — if it in principle can deliver to the border of the EU and Ukraine.But even the existing tariff for transporting gas to the entry points to the GTS of Ukraine to import gas either comparable to that in EU countries (in Italy and Hungary it is slightly below the current Ukrainian), or now far surpasses them: he is above the Slovak 1.8 times, and the Austrian government.This is bad news for Ukrainian gas consumers does not end there, as the intention to raise tariffs declared and the gas distribution network — an average of 1.84 times.Only due to the transport component of the cost of one thousand cubic meters of gas for Ukrainian consumers may rise by an average of 1,300 hryvnia. Additional consumer spending will amount to about 36 billion USD, of which 18.5 billion will have to pay to the population, which at the elections had promised reduction of tariffs.
And that’s without taking into account the rising cost of gas, which in the case of force majeure with zero transit can be significant. Today in Ukraine no one even dares to predict the cost of imported gas in such a scenario.And equally and without regard to technical problems with the supply of gas to the South and South-East of Ukraine.It seems that such a development would have a severe impact on the rating of the ruling monopolist and President Zelensky, and industry. But probably care little for characters who keep their assets in Maryland and Liechtenstein.Sergey Levchenko

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