|
ZERKALO NEDELI: ARM AND LEG TO GAZPROM
On February 12, after three hours of negotiations, Presidents Viktor Yushchenko and Vladimir Putin found a new formula of gas cooperation between Ukraine and Russia. They announced that Ukraine’s Naftogaz and Russia’s Gazprom would found two joint ventures on parity terms. The news inspired hopes that Ukraine would get rid of the much hated intermediary companies RosUkrEnergo and UkrGazEnergo. Viktor Yushchenko sounded satisfied with the agreements reached in Moscow and Prime Minister Yulia Tymoshenko called them “a victory of the democratic team.”
Same Old Story
On second thought, the agreement does not look that encouraging. The day after the talks between Yushchenko and Putin, the latter’s future successor and currently first vice-premier Dmitriy Medvedev stated quite unambiguously, “Most probably, we will need an intermediary, because Ukraine can not afford any prices higher than the price of Central Asian natural gas, i.e. 179 dollars per thousand cu m.” He stressed that it would be impossible to deliver Central Asian natural gas to Ukraine without intermediaries. “The contracts already concluded will have to be fulfilled by intermediaries, no matter what you may name them,” Medvedev said. At the same time, he stated Russia’s readiness to supply its gas without go-betweens. “We may as well supply our gas without go-betweens. All we need is money. But the moment Ukraine begins to buy Russian gas instead of Turkmen gas the price will grow by a third. That is too much for Ukraine’s economy,” Medvedev warned, reiterating Russia’s readiness “for any forms of cooperation with Ukraine in natural gas supply.”
One of the possible “forms of cooperation” was disclosed on February 14 by MP Yuriy Miroshnichenko of the Regions Party. On the live talk show “I Think So” on 1+1 TV channel he quoted some excerpts from a draft agreement on founding two new Russo-Ukrainian joint ventures. The document (which may not be the only one up Gazprom’s sleeve) contains anything but parity terms. On February 15 Naftogaz came up with a feeble statement, saying that “the contents of the quoted document contradicted the agreements reached by the Presidents of Ukraine and Russia and the positions of the negotiating sides.” However, Naftogaz did not refute the existence of that draft agreement or the fact that Gazprom had offered it to Naftogaz. Neither did Gazprom…
What would suit Naftogaz in the new joint venture? On the external market it hopes to have a vote in price talks with Turkmenistan, Uzbekistan, and Kazakhstan, thus having a hand in the delivery of natural gas to the Russia-Ukraine borderline. Naftogaz would like to have partial access to Central Asian gas (which is now under the full control of Gazprom’s daughter company Gazpromexport). Naftogaz also hopes to get a quota for export of natural gas to Europe (albeit within the joint venture) and thus be able to export surplus amounts. In 2006 RosUkrEnergo exported some 9 billion cu m of gas via Ukraine, declaring $95 per 1,000 cu m at customs and selling it at $300. It is easy to calculate how much Ukraine could have earned but for that go-between… In 2007 RosUkrEnergo exported some 7 billion cu m. The scheme was the same: declaring $130 at customs, RosUkrEnergo sold the same gas at $300 - $400.
Naftogaz would like to buy up and dispose of all gas delivered to the Ukrainian border. However, the Russian version of the gas agreement states the following:“The natural gas supplied to Ukraine and extracted on Ukraine’s territory is meant exclusively for Ukrainian consumers and may not be sold beyond Ukraine’s border.” This definitely means a ban on exporting gas, which Ukraine hoped for when trying to get rid of RosUkrEnergo.
In the meantime, RUE stays on the market, and not only as an intermediary supplier but also as the monopoly exporter of gas to Europe (under active long-term contracts).
The future joint venture is supposed to receive natural gas from Gazpromexport (or another company affiliated with Gazprom). Annual contracted supplies (currently owned by RUE) are to consist of:
- 40,500M cu m of Turkmen natural gas at $130.75 per 1,000 cu m in the first semester of 2008 and $150.75 from July 1;
- 10,500M cu m of Uzbek natural gas at $130.75 per 1,000 cu m in the first semester of 2008 and $160.75 from July 1;
- 4,000M cu m of Kazakh natural gas (the price is not set).
The tentative agreement proceeds from the current annual quota for supplies of Central Asian gas to Ukraine – 55 billion cu m. Besides, the new joint venture is to start operating in April at the earliest.
Interestingly, the Russians want the joint venture to be registered in Switzerland (just like RUE). Someone must be very reluctant to leave the friendly canton of Zug where taxes are so low…
Here is another excerpt from the Russian draft of the Agreement on Development of Relations in the Gas Sector:
“2. Establishment of the JV
2.1.… The parties have agreed to found on parity terms (each holding 50% in the statutory fund) Joint Venture 1 and Joint Venture 2.”
JV 1, tentatively named Rosukrgaz AG, will be registered in the Swiss canton of Zug for …“supplying natural gas to Ukraine.”
Pike Sentenced to Drowning
The Russian authors of the draft agreement see Joint Venture 2 as a limited liability company or a closed holding selling natural gas to industrial and other consumers. Prima facie, the new company is meant to solve two big problems created by UkrGazEnergo since it was founded in 2006: a) the supplier is unreliable; b) the supplier tends to overcharge Ukrainian consumers, especially the most solvent category – industrial companies.
By hook or by crook, in late 2007 UGE became the monopoly supplier of natural gas to all big industrial consumers in Ukraine. Moreover, consumers had to pay UGE for storage of gas in underground gasholders. As the monopoly, UGE was now able to dictate its terms to all industrial enterprises in this country.
Russian companies already own four of six Ukrainian oil refineries. We all remember too well how they stopped as one “for scheduled maintenance,” creating gasoline shortage crises in the country. Now it looks like Ukraine is going to be vulnerable to crises in other sectors that depend on natural gas.
UGE controls the industrial segment of the national market. Now, through JV 2, Gazprom will get its hands on practically all segments, including the socially important ones. And once it gets its foot in the door, it will never leave…
The authors of the draft agreement set another trap: they mean to authorize JV 2“to sell the whole amount of natural gas – both imported and extracted on Ukraine’s territory.” This means that Naftogaz, which extracts natural gas in Ukraine and sells it to households, governmental structures, and public utility enterprises, will have no right to dispose of it! In other words, this means direct sociopolitical climate control in Ukraine from the Kremlin (through Gazprom’s office). What if that JV 2 decides to raise the price for households on the eve (or instead) of a presidential or parliamentary election?
Furthermore, the draft agreement says that in case JV 2 is not starting to operate in April 2008, UkrGazEnergo may possibly be used instead of it. According to our sources, the Russians even accept Voronin as the president of JV 2. Everything is simple. Thus, we don’t really need to change the name “UkrGazEnergo”…
Creation of JV 2 will double the Russian part in the Ukrainian gas distribution sector. This is a very expensive way to get cheap gas.
We should also remember that two days ago a quadripartite commission on revision of gas supplies and payments started its work in Moscow. This commission is made up of the representatives of Gazprom, Naftogaz, RosUkrEnergo and UkrGazEnergo. We believe that someone will be surprised with the results of the revision when he finds out how much money was stolen…
What should be sacrificed: Ratings or Independence?
It looks like neither the President nor the Prime-Minister or new Naftogaz’s management is satisfied with the proposition from the Russian side. However, every one of them could be satisfied with completely different results of negotiation talks. The President could be satisfied with no results at all as long as Ukraine receives gas for USD 179.5. He could also accept Voronin and Firtash in charge of UkrGazEnergo. The President indicates that the price of gas is much more important than the scheme employed for its supply and distribution in the country. In fact, most Ukrainian citizens support the President in this matter. What can we add here?
Yulia Tymoshenko will be very disappointed if the Russian and Ukrainian sides don’t reach an agreement before April 1, 2008 – the deadline defined by the Russians. If the agreements reached during negotiations include at least half of the terms stated in the abovementioned draft, this will hardly bring any positive changes for Ukraine. However, Yulia Volodymyrivna is ready to sacrifice the country’s interests for the low price of gas and liquidation of RUE.
Naftogas is receiving directives from both the Presidential Secretariat and the Cabinet of Ministers. Besides, it should follow the price policy defined by Yushchenko and Tymoshenko: Ukraine should receive “cheap” gas since neither the Prime Minister nor the President want to make decisions that would negatively influence their ratings before the upcoming elections of 2009. At the same time, Naftogaz is not provided with information about Gazprom’s internal tendencies that could be helpful during the negotiations; Naftogaz is not provided with necessary information about the Central Asian region; Naftogaz often receives contradictory orders from the Presidential Secretariat and The Cabinet of Ministers...
It is thoughtless to say that liquidation of RUE will automatically make the existing gas supply scheme transparent. The only possible transparent gas supply scheme is the one in which a) Ukraine buys gas from Russia for market price, i.e. for USD 314; b) Russia pays market price for gas transit and gas storage in Ukrainian underground storage facilities; c) Naftogaz transparently distributes gas inside the country; d) the government provides budget and utilities sectors with gas produced in Ukraine and is not worried about the price of gas for the enterprises of Akhmetov, Firtash, Pinchuk or Indian investors.
If we begin to buy gas for European prices and use transparent schemes in the gas sphere, we will be able to increase our national gas production, re-equip our power-consuming industries and cultivate development of alternative sources of energy. It could be a strong impulse for technological progress and a real step towards strengthening of national security.
However, neither Tymoshenko nor Yushchenko is ready for this step. Notwithstanding the fact that their teams have people who agree with this transparent gas supply scheme, there is no hope that it will be implemented in our country this year. Eventually, we will receive gas for European prices. This will happen much earlier than we think. However, by legalizing Gazporom in our market, we won’t have any impulse for re-equipping the power-consuming industries – we will live under the patronage of Gazprom.
Thus, Tymoshenko, Yushchenko and Yanukovych should take the risks of losing their ratings and make the decision about buying gas for European prices. They also should do everything to make this process less painful for the citizens. Otherwise, all talk about transparent schemes, national security, technical re-equipment and eliminating corruption will be just talk.
Alla YEREMENKO, Yulia MOSTOVAYA
“Zerkalo Nedeli”, Ukraine’s International Social Political Weekly, 16 - 22 February, 2008
|
