By Dr. Adbul Ruff
The Kremlin has used gas a powerful instrument for political maneuverings, especially in its “backyards”. Russia strives to reasserts its authority in the former Soviet space. Recently, Russia has shut off all its gas supplies to Europe through Ukraine — the latest move in a pricing dispute that has reduced or halted fuel deliveries to a dozen countries during a winter cold snap. About 80 percent of Russian gas to Europe is shipped via Ukraine. Other smaller pipelines run through Belarus and Turkey. The cut-off comes on Orthodox Christmas, celebrated in Russia, Ukraine and a number of other Orthodox Christian countries in Europe, almost the same time when fascist Israel invaded Gaza and began killing the innocent Palestinians there.
Russia and the West supported East European nations are at logger heads these days. The EU depends on Russia for about a quarter of its total gas supplies, some 80% of which are pumped via Ukraine. Russia, which supplies its gas to Europe through Ukraine, has left Europe without gas. Russia cut gas to Ukraine itself a week ago, in the wake of a row over unpaid bills and the expiry of a supply contract. But although both countries guaranteed that transit supplies to Europe would be unaffected, they were soon cut off amid mutual accusations between Kiev and Moscow. There is zero transit. The shutdown triggered by a price dispute between Moscow and Kiev, halted flows to a dozen countries and disrupted supplies to big economies including Germany, France and Italy.
As hundreds of thousands of homes in Europe remain without heating, Czech Prime minister Mirek Topolanek, whose country holds the EU presidency, will travel to Moscow after talks with Ukrainian leaders on 09 Jan to talk with Russian Prime Minister Vladimir Putin to help reach a deal to resume gas supplies to Europe. Russia cut off supplies following a dispute with Ukraine over transit fees, and the price of gas for Ukrainian consumption. Supplies of Russian natural gas via Ukraine have not resumed, despite the arrival of EU monitors in Ukraine. Russia had said shipments of gas to Europe via Ukraine would resume when a team of Russian, Ukrainian and EU monitors started work in Kiev. But Russia said it required a final written agreement to resume pumping.
Russian President Dmitry Medvedev said, “Our goal is to show who is to blame for stealing gas. Such thievery can’t be left unaccountable.” Medvedev also accused Ukrainian authorities of corruption. “The money from these deals was probably used for political aims or to solve personal problems,” he said. But Ukraine’s president and prime minister both repeated denials that Ukraine had stolen gas. “Those statements that have in recent days been heard from the mouth of the Russian leadership – they are incorrect, they humiliate Ukraine,” said President Viktor Yushchenko. Topolanek, representing the EU in Kiev, said a deal was not far off and they have to fine-tune the technical details and to agree on the signature of a trilateral agreement.” Officials meeting in Kiev said an agreement could be finalized, but recriminations continued late on Friday over Russian charges that Ukraine had been stealing gas.
Europe’s heavy dependence on Russian energy — and its vulnerability to supply disruption — was highlighted when Moscow reduced volumes to Ukraine on January 1 after failing to reach agreement with Kiev over debts and gas prices. More than 15 countries have been hit by the shutdown of Russian supplies. Serbia and Bosnia-Hercegovina are among the worst hit, as many homes there rely on communal heating stations that only run on gas. Bulgaria, which gets nearly all its gas supplies from Russia via Ukraine, has imposed gas rationing and has closed schools. An estimated 100,000 people in Serbia were left without heating when Russian gas supplies to Europe were halted on 07 Jan.
In Bulgaria, thousands of households spent a freezing night without central heating because utilities need time to switch to alternative fuels, municipal officials said. Schools were shut and some companies were closed Wednesday. Czech importer RWE Transgas said the main transit pipeline from Russia to the Czech Republic and Western Europe was halted from midnight. Austria, Slovakia, Poland and Romania also said their supplies were halted, joining Hungary, Bulgaria, Turkey, Macedonia, Greece and Croatia who announced Tuesday that supplies of Russian gas via Ukraine had shut down.
Most of its gas-powered heating stations have switched to alternative energy but some can only operate on gas and have had to shut down completely, our correspondent adds. It has also received emergency gas from Hungary and Germany. In neighbouring Bosnia, some 72,000 homes were without heating in temperatures as low as -15C. Leaders warned its gas reserves would last only a few more days. Angry Bulgarians protested in front of the Ukrainian embassy in Sofia on Thursday, holding placards accusing Russia and Ukraine of being “gas terrorists”, the Associated Press reports.
So far eastern and central Europe has borne the brunt of the row, with Bulgaria cutting or suspending supplies to industrial users. Two fertilizer companies halted production. Budapest airport said it would switch to oil from gas heating. The Euro zone’s major economies have so far escaped any significant economic repercussions, but France has reported a drop in supplies and an Italian industry ministry spokesman said Italy has begun tapping its stockpiles of natural gas.
The Czech Republic, which holds the EU presidency, said the Union was considering holding a summit with Russia and Ukraine but would prefer to stay on the sidelines. With gas stockpiles in Europe falling with each day the disruption continues, and sub-zero temperatures driving up demand, there is no sign Moscow and Kiev are closer to resolving their row over pricing and transit fees. Ukraine’s pro-Western President Viktor Yushchenko wrote in a letter to Russian President Dmitry Medvedev late 06 Jan Tuesday.
In a separate letter to European Commission chief Jose Manuel Barroso, Yushchenko asked the EU to use all efforts to start talks to end the crisis, which has further dented investor confidence in his country. Some member states have bilateral energy deals with Russia, undermining hopes of a united front. The cost of protecting Ukrainian debt against restructuring or default rose to 54.75 percent on an upfront basis, meaning an investor buying protection for $10 million of Ukrainian debt must pay $5.475 million plus $500,000 a year for five years.
German energy provider E.ON Ruhrgas said drastic cuts and a prolonged cold spell could cause shortages. High energy users like aluminum, glass and metals makers could be hurt by a lengthy crisis. The shutting down of gas supplies via Ukraine has supported gas prices in Britain, although they eased slightly Wednesday after forecasts of milder weather. Benchmark U.S. crude futures were slightly weaker at around $48 a barrel, but winter heating fuel was trading higher as the shortage of gas in many European countries led to fuel switching.
Bulgaria, Greece, Macedonia, Romania, Croatia, Serbia and Turkey had all reported a halt in gas shipments, while France, Germany, Austria, Poland and Hungary had reported substantial drops in supplies from Russia. In the Czech Republic, gas operator RWE Transgas confirmed Wednesday that Russian gas deliveries through Ukraine stopped completely overnight. The country still receives gas from another route from Norway and customers were not immediately affected, the company said. Romania, which imports about 30 percent of its gas from Russia, said its president, has called Russian Prime Minister Vladimir Putin to discuss the issue and that its government is holding an emergency meeting with producers and distributors.
Russia stopped all gas shipments to Ukraine on Jan. 1 after both countries failed to agree on prices and transit fees for next year. Over the past week, Russia accused Ukraine of siphoning off tens of millions of cubic meters of gas meant for Europe from its transit pipelines. Ukraine admitted diverting some transit gas, saying it had the right to use the fuel to run its pumping system. Gazprom then started dramatically reducing supplies to European consumers this week.
The crisis erupted after Russia and Ukraine failed to agree on a gas price for 2009 and on payment of $600 million Gazprom says it is due from Naftogaz. In 2008, Russia charged Ukraine about half what it charged its European customers for gas. The subsidy is a legacy of the Soviet era, when both countries were part of the U.S.S.R. Gazprom has long sought to charge Ukraine European-level prices. Ukraine says that if it pays more for gas, Russia should pay more for shipping gas through Ukraine.
Neither side has met for talks since negotiations broke down before midnight on Dec. 31, and each side has blamed the other for the breakdown. The cut-off came after Gazprom and Ukraine’s Naftogaz agreed to resume face-to-face talks and the head of Naftogaz said he would fly to Moscow on Thursday. Dubbing, the Naftogaz head, said Wednesday the meeting was still on and that the two sides were looking for a solution to the crisis.
Russia has expressed frustration with the absence of negotiations, and said it is ready to resume talks anytime. Ukraine may be in the stronger negotiating position. The country had about 16 billion cubic meters of gas in its vast underground storage system Tuesday. With Ukraine consumers using about 200 million cubic meters a day, and Ukraine producing some of its own gas, the country should not see shortages until early April, the government says.
Up to now Ukraine has got its gas at just $179 per thousand cubic metres. This year Russia wants to raise that to $250. That’s still far below what the rest of Europe pays. Many say Moscow can’t pretend this is purely a commercial dispute. There’s little doubt that Russia is using its energy resources as a political tool. What does the Kremlin want to achieve? Gazprom wants to build a pipeline down the Baltic Sea, bypassing Ukraine, to supply its gas directly to the rich markets of Western Europe.
But the project, known as “Nordstream” is hugely expensive, fraught with environmental problems, and unnecessary. The current pipeline network through Ukraine is perfectly adequate. Except, that is, if Ukraine keeps jeopardizing supplies to Europe. The Kremlin does not want to rely on a transit country like Ukraine and seeks alternative transit routes. Powerful political figures in Ukraine are colluding with the Kremlin to foment the crisis and bring down President Yushchenko. This would benefit Ukraine’s increasingly powerful Prime Minister Yulia Timoshenko. Supporters of this theory say we can expect Ms Timoshenko to turn up in Moscow some time next week, sign a deal with the Kremlin, and return home to Kiev in triumph, having “saved” Ukraine from disaster.
However, according to those who subscribe to the political weapon theory, Russia’s purpose is to bring down the government of Ukrainian President Victor Yushchenko. The Kremlin has never forgiven Yushchenko for leading the Orange Revolution in 2004, and for moving Ukraine out of the Russian fold and towards a much closer relationship with Europe and the US. Yushchenko has applied to join NATO, and says he wants Ukraine to eventually join the European Union. This is anathema to many Russians who consider Ukraine a part of the Slavic heartland.
Russia’s gas monopoly Gazprom, which had sharply limited supplies through Ukraine on Jan6, has stopped all gas shipments through the country “It was the Russian side’s decision to stop all gas deliveries to Europe” through Ukraine, which calls the Moscow decision “inappropriate.” Gazprom blamed Ukraine for the closure, and said it was raising supplies to the European Union and Turkey via alternative routes. Despite those measures, the Ukraine shutdown cut Russia’s supplies to Europe — this depends on Russia for a quarter of its gas supplies — by half. Some countries have taken emergency measures to eke out dwindling fuel reserves by switching to other energy sources.
Russia confirmed the cutoff, but said it was Ukraine’s fault because it had shut down the last pipeline carrying gas from Russia. Gazprom also says it is reducing to compensate for the gas it accuses Ukraine of diverting. The Russia-Ukraine natural gas dispute has left tens of thousands of people in Europe without heat as governments scrambled to find alternative energy sources. Gazprom meanwhile is losing substantial income during a peak season for gas consumption. On a typical winter day, experts say, Gazprom would be pumping about 350 million cubic meters of gas to Europe. It also will soon see an excess of gas in its system that it will have to deal with.
Russian Prime Minister Putin has promised that EU monitors can go anywhere in Russia to verify gas flows, said Topolanek. The EU said the first of its monitors arrived in Kiev on Friday lunchtime. They were expected to start touring gas pumping stations later. A major stumbling block was removed earlier when Ukraine agreed to accept Russian experts as part of the monitoring mission. The head of Russia’s state-controlled gas monopoly Gazprom, Alexei Miller, said Ukraine had given verbal agreement over the monitors. “As soon as the document has been signed… and observers are ready for practical work on the gas stations, transit of gas via Ukraine will be possible,” he said in a statement.
EU experts claim that even when gas supplies are restored, it may still take several days for the gas to reach some areas. And even then, reports the BBC’s Gabriel Gatehouse from Kiev, there is still no progress on the underlying issue that provoked this crisis in the first place: the question of how much Ukraine should pay Russia for the gas it consumes in the future, and how much Russia should pay Ukraine in return for transporting gas to Europe.
The standoff has left growing numbers of European Union member states without Russian fuel in freezing mid-winter temperatures. There have also been serious economic setbacks in Europe. The crux of the matter is Russia being a veto wielding UNSC member with a surging economy has become a “problem” for the US-led west which assumed Russia would collapse after the disintegration of the Soviet Union and Russian would eventually become a puppet state to be manipulated by the USA and Europe. West is increasingly becoming a weak structure in front of a surging Moscow and unable to “contain” Moscow in any way, including by invoking the WTO issue. The Russo-Ukraine standoff would continue to be stable and would resurface time and again.
Gazprom relies on Ukraine’s vast pipeline network to deliver the bulk of those exports to Europe and Russia wants to self-reliant and does not want to trust a pro-US Ukraine any more. With sub-zero temperatures across the country, at least eight towns and cities were technically cut off in this gas cut. Moscow perhaps wants to coerce Kiev to return to the Kremlin’s fold.
Considering the strong position of Russia and the reasons for the standoff behind the “Gas strikes” as being political, rather than economic or security, the EU has a limited ability to act and it has failed to reduce its use of Russian energy because of internal divisions and the lack of alternatives. The EU, therefore, has turned down requests from Kiev to mediate, saying it is a commercial dispute to be solved by Kiev and Moscow, but however sent a mission to meet Ukrainian officials Monday. But pressure on the EUnion to act is likely to increase if the dispute continues. World has already seen how new Moscow functions and USA cannot bully Russia as it does Pakistan or invade as it has done in Afghanistan and Iraq. How far the Western diplomacy is going to work now in the “cold” conditions of the East remains to be seen.