The High Treason. Non-settled gas dispute with the Russian Gazprom is leading Ukraine to energy bankruptcy and deep economy problems.

On 1 of December Russian Gazprom cut off gas supply to Ukraine. This news was among the top-3 in the entire world media during the New Year holidays. I think it would be first if there was no war in sector Gaza. The reasons of Gazprom’s actions are totally legitimate: unpaid debt for gas supply to Ukraine in 2008 and non-existence of a supply contract for 2009. Such a confusing situation seems to be not a terrible negligence of Ukrainian authorities, but a carefully planned scheme. The goal is to take the case to state of total mess, and then to re-divide the scheme of control of profits from gas supply to Ukraine. As a side effect, the State oil and gas company Naftogaz Ukraine may go bankrupt and Ukraine may lose control of its huge gas transportation system in favour of Russia or some Russia-leaded consortium.

These actions of Ukrainian officials can definitely be qualified as a high treason. But nobody will be charged for that.

There is no need to remind here the very details of the debt-dispute Russia and Ukraine had in late December 2008 – the media explained it very good. Talking in general, the Naftogaz Ukraine failed to pay off a debt for gas shipped from Russia in 2008: it paid $1.52 billion just one day before the New Year, but Gazprom claimed the total debt was $2.1 billion (including $450 million of penalties for the late payment for November and December gas shipments).

Current situation differs from the gas problems of early 2006. Now Ukraine has significant amounts of gas saved in storages: about 17 billion cubic metres (bcm) is owned by Naftogaz Ukraine, and the intermediary RosUkrEnergo (I’ll talk about this company later) has extra 11 bcm. That’s why there is no evidence of harm for Ukraine caused by the gas cut-off. Yet. But the gas battle with Gazprom will definitely influence the crisis-hit Ukrainian economy, pushing it down. World economy crisis reduced the industrial energy consumption in Ukraine almost by a quarter, and the main problems may be laid on shoulders of Ukrainian citizens. Higher gas prices will lead to rise of a gas fees for the households, which are heavily subsidising by the state.

The problem is that a dramatic raise of gas prise was not planned in the budget of Ukraine for 2009, approved by Parliament and signed by President before the New Year holidays. Moreover, a gas-supply part of the budget had been highly criticised even before problems with Gazprom went too far. The Deputy Head of the Secretariat of the President of Ukraine Oleksandr Shlapak said on 29 December that the 1.6 billion hryvnias, the budget assigned for Naftogaz Ukraine to keep low gas prises on the internal market, is not enough at all. “If we even manage to keep a gas price at $179.5 per 1,000 cubic meters (tcm) during the talks with our Russian partners, and the Ukrainian hryvnia’s rate to dollar stay at 7.5, there will be a need to compensate for Naftogaz Ukraine up to 9.2 billion hryvnias. Feel the difference”, he informed.

This means that in 2009 somebody will go bankrupt: either Naftogas, or Ukrainian citizens, or even Ukrainian state.

The gas price for Ukraine is really a painful question for years. In 2008 Naftogaz Ukraine had to pay $179.5 per tcm for gas from Russia, which is almost 3 times less than EU countries were paying. Due to the agreement to switch to market prices “step by step”, Gazprom offered the price rise to $250 per tcm for 2009. But it was already too high for Ukraine: it was going to pay not more than $201 per tcm (according to budget plans of the Government). As a result, Ukrainian officials didn’t sign even temporary agreement and left the country without contracted gas supply at all. Can somebody imagine such a thing to happen on a state level in any other European country?

It’s obvious that something is standing behind this artificially made conflict. It seems that the real source of Ukrainian gas problems, which may easily ruin the country’s economy, is a fight for the profits from gas transit and supply to Ukraine. As for this moment the only party of gas-supply scheme didn’t lose a cent from this situation is the RosUkrEnergo, the gas-trading intermediary between Russia and Ukraine. This company is making profit “buying” huge amounts of Russian gas on Ukrainian border and re-selling it to Ukraine (working also indirectly on Ukrainian domestic market) and some Eastern European countries (like Hungary and Romania). So, everyone who is in charge of RosUkrEnergo has guaranteed billions of profit. As for today, Russian Gazprom owns 50% of RosUkrEnergo, another half is under control of the commercial structures of Ukrainian-born businessman Dmytro Firtash. By the way, he also is linked with Ukrainian Nadra bank, which was accused by Yulia Tymoshenko in fraud with hryvnia rate in December (here is a link to my post about this matter).

That’s all I have time to write today. To be continued…