NEWS ALERT: Freezing Europe Awaits Russian Gas
by Stefan J. Bos, Worthy News Europe Bureau Chief
BUDAPEST, HUNGARY (Worthy News) — Russian natural gas destined for Europe was flowing through Ukraine’s pipeline system Tuesday, January 20, raising hopes of an end to a two-week blockade that impacted nearly 20 countries, officials said.
Russia began pumping gas into one of five major inlets in Ukraine’s pipeline system in the early morning hours, and fuel was crossing into Ukraine at all inlets by mid-morning, said Valentyn Zemliansky, Ukrainian natural gas monopoly Naftogaz Ukrainy.
It came shortly after the prime ministers agreed to resolve their countries’ dispute over natural gas prices, signing a supply and transit agreement Monday, January 19, in Moscow.
The European Union’s executive body cautiously welcomed the move. The European Commission warned there had been “many false dawns in this dispute”.
Earlier, Commission spokesman Johannes Laitenberger expressed frustration that tensions between Moscow and Kyiv resulted in a shutdown of natural gas deliveries.
“If the gas doesn’t flow again, we will have to look point-by-point at our relations with Russia, with Ukraine, and assess in each case whether we can continue to do business as usual under these circumstances,” Laitenberger said.
The troubles began on New Year’s Day, when Russia halted gas shipments to Ukraine, saying its neighbor had outstanding bills of more $2 billion. Moscow later demanded $450 per 1,000 cubic meters of gas for future deliveries – about twice the amount offered by Kyiv.
COMPLETE SHUTDOWN
The dispute eventually led to a complete shutdown of gas deliveries to the rest of Europe, with Moscow and Kyiv blaming each other for the disruptions. Russian Prime Minister Vladimir Putin told reporters that under the new deal, Ukraine will receive gas at a discount this year and Ukraine will charge Russia old prices for the transit of gas to Europe.
“Russia and Ukraine will switch to the European present formula in natural gas trade,” said Putin. “At the same time, we have agreed that in 2009, we will make a 20 percent discount for our Ukrainian partners, on the condition that Russia retains a discounted tariff for the transit of its gas to Europe through Ukrainian territory in 2009. That is the same tariff it paid in 2008. At the same time, we have agreed that starting on January 1, 2010, we will completely switch to European standards in our pricing – both for gas supplies and for gas transit.”
Under the new deal, Ukraine would pay roughly $360 dollars per 1,000 cubic meters of Russian natural gas. In comments aired by Russian television, Ukrainian Prime Minister Yulia Tymoshenko said natural gas would be flowing again soon, after Russian and Ukrainian energy firms work out the details.
“We have instructed [Ukraine’s] Naftogaz and [Russia’s] Gazprom chief executives to prepare all the paperwork according to the understandings we reached in our talks today…Immediately after all the documents on gas transit and gas supplies are signed, all gas supplies to Europe will resume,” she said.
AUTHORITY CONCERNS
Russia’s President, Dmitri Medvedev, expressed concern that Ukraine’s prime minister may not have the authority to implement the deal. Speaking on Russian television, the Russian leader recalled political tensions between Ukrainian’s prime minister and president, Victor Yushchenko who did not attend the energy talks in Moscow.
In fact, on Tuesday, January 20, Yushchenko’s chief of staff already criticized the deal, saying it would undermine Ukraine’s already fragile economy. “Inasmuch as the government is fully responsible for the state of the national economy, the signed agreement is liable to negatively affect Ukraine’s economic and energy security,” Viktor Baloga said in a statement on the presidential Website.
Baloga also added the deal was characterized by a “lack of transparency in terms of prices for imported Russian gas which gives rise to suspicions of corruption”. It was unclear what impact the presidential opinion would have on gas flows. “I sincerely hope that the prime minister of Ukraine, Yulia Tymoshenko, who is present at the conference today, has the necessary mandate to represent her country,” said Russian President Medvedev earlier.
Yet, after nearly two weeks without Russian gas, the resumption of deliveries cannot come soon enough – especially in Eastern European countries, where hundreds-of-thousands of people are without heat and many have perished due to the cold.
Several factories have been forced to suspend operations at a time when the region is suffering from the global economic crisis. Over the weekend the International Monetary Fund announced a 530 million dollar financing package for Serbia, one of the country’s hard hit by the gas crisis, following similar deals with Hungary, Latvia, Belarus and Ukraine.