There is at least one clear conclusion from the “Cold war” of January 2009: to avoid a future gas supply crisis, Europe needs a common energy security policy. I would suggest to read a blog-post of Charles Tannock, Member of the European Parliament for London, and an article of Andrew Wilson, a senior policy fellow at the European Council on Foreign Relations, published in the Wall Street Journal, for extra thoughts and information on this point.
I agree that the unified energy supply scheme is a very positive thing for Europe. But what worries me is that the new European energy security concept is moving step-by-step against the national interests of Ukraine – not without help of Russia and powerful trans-national corporations. In a widely proposed system of co-operation, which foresees a foundation of gas consortium with the participation of the EU, Ukraine and Russia, all the parties are winning some benefits, except Ukraine, which is supposed to lose control over its gas pipelines’ system for decades (or for ever, depending on ‘flexibility’ of Ukrainian officials).
To my point of view, the first step to the formation of the united system of European Energy Security should be a very straight price talk. Europe cannot be united in the gas supply questions, until it doesn’t have a common formula of price for gas and its transportation. Without such an agreement all the other steps would be inefficient.
I liked very much a recent speech of the Prime Minister of Ukraine Yulia Tymoshenko at the Munich Security Conference on Saturday, 7 February 2009. “The price of the gas transit has not been formed in unified way. The question is: Why?” she said. “If we find such common approaches, we will be able to eliminate a political component from the system of pricing and supplies of gas to all the European countries.”
But why indeed the EU, not talking about the European continent as a whole, hadn’t manage to form the unified gas price and transit approach for all the time of its existence? The question is not rhetoric, and the answer is simple: the formation of the common Energy Supply (or Security, if you want) System for Europe is disadvantageous for the main European energy corporations. It is not a secret that the oil and gas trade business is very profitable, inter alia, by its shadow or semi-shadow schemes, which would be impossible to realise, if all the business were totally transparent and understandable even for members of the European Commission or the European Parliament. So, the establishment of a really clear system of gas trade in Europe looks like a miracle at the moment.
What next? The international investment conference on the modernisation of Ukrainian gas transit system is going to take place on 23 March in Brussels, according to the mutual arrangement of the President of Ukraine Viktor Yushchenko and the President of the European Commission Jose Manuel Barroso of 27 January 2009. The talk-work on the preparation of public opinion has already started. Vladimir Chizhov, Russia's ambassador to the European Union, said to journalists on 4 February 2009 that “the fact that the Ukrainian pipeline network was neglected ever since the collapse of the Soviet Union is recognised by everybody... The fact that its technical status is not up to standard is recognised by everybody. The fact that money supposed to be spent on maintenance from transit fees was spent on something else is recognised by everybody”. Only the last question may be considered as a full truth.
The potential members of the future Consortium are: Gazprom, Naftogaz Ukraine, and directly involved European companies – like E.ON Ruhrgas AG, GDF Suez SA., Gaz de France, BASF SE's Wingas, and Eni SpA. Russians, Ukrainians and Europeans would own the one third of the company each. People from GDF Suez, E.ON Ruhrgas AG and Eni SpA have already had the consortium-related meeting with the Prime Minister of Russia Vladimir Putin in Berlin on 16 January 2009.
Ukraine is supposed to give (rent) to the consortium its gas pipelines system, Russian Gazprom – gas fields, European companies – money. Some Western analysts say that Ukrainian government could sell a stake in Ukraine’s gas transit system to a new consortium. I don’t think it’s a good idea for Ukraine and its future.
Yes, Ukraine needs money for the gas transit system upgrade, but it may find money by itself (it will be not difficult to take a credit for a good-written & well-thought project), going on with receiving the full profits from the transit of the Russian gas to Europe. Ukraine is going to receive from Russia from $2 billion in 2009 to $4 billion per year, starting from 2010.
As for the European Union there is no economic difference at all, whether there is the Russia-Ukraine-EU consortium or not. Russia may find a purpose to switch off gas anyway, and the possible consortium-profits will be collected in hands of managers of the multinationals. And what is good for Ruhrgas, Shell or Gaz de France is not automatically good for Germany, Netherlands, or France. Don’t even mention the interests of tax-payers: the companies, which may directly operate with Ukrainian gas pipeline system, would be for sure an affiliated structures of famous brands, registered in offshore zones.
The establishment of the European common energy security system is not a question of today. It is even not a question of tomorrow. But the Europe has to start preparations for the day after tomorrow right now, working out all the papers needed, and communicating with partners – especially hard talks are supposed to be with Russia. Moreover, I may bet that the talks would finish with nothing. The real goal of Russia, Gazprom, and European energy corporations in Consortium-project are extra profits they may have, fooling Ukraine around. The sorting out the system of the gas supply to Europe looks like not profitable for them at all. The common sense had never beaten the business strategy. It’s a rule for today. What will be the day after tomorrow or later (I mean in long-term period)? Nobody knows, but the little strokes fell great oaks.
Showing posts with label Putin. Show all posts
Showing posts with label Putin. Show all posts
Sunday, February 8, 2009
Monday, January 19, 2009
Ukraine-Russia gas transit and supply contracts: Europe will not suffer from gas-cut during next 10 years, gas price for Ukraine still in shadow.
First of all, I would like to thank Tammy Lynch, Bakinets, and Anonymous reader for their comments to my gas posts. Well, I have to confess that my price prognosis has appeared to be rather pessimistic. I will be really happy, if I am wrong: the less the gas price is, the better it is for Ukraine and its economy.
Why I suggested that the gas price for Ukraine will be around $320 per tcm in 2009? My thoughts were based on three things:
1. Ukrainian negotiators were insisting on fixed gas price (I was pleasantly surprised when I’ve heard today that the gas price formula has been worked out for Ukraine).
2. The Prime Minister of Russia Vladimir Putin, President Dmitri Medvedev and the head of Gazprom Alexei Miller were declaring the “European price” for Ukraine at the level of $450 per tcm (last time Mr. Putin told that on Saturday, 17 January).
3. Gazprom has just switched to some “European formula” in his relations with Turkmenistan, and the price of Turkmen gas for Russians in the first quarter of 2009 will be about $300 per tcm.
It seemed logical to assume that the gas price for Ukraine should be at least more than $300. It is really great if the today’s statement of Prime Minister of Ukraine Yulia Tymoshenko is true, and Naftogaz will pay only around $235-250 per tcm. (She also told that the 20% discount will save $5 billion, which is possible when the price is $220). It would be like a miracle, if the average price for Ukraine were $199 as was suggested by the Secretariat of Ukrainian President. But we have to think, why Moscow agreed for such a low price level, as the Gazprom is clearly not a charity foundation, especially at crisis times.
Anyway, it is still difficult to say, how much Ukraine will pay for gas in 2009. There is not much information about the gas supply contract at all. Here is all I know today:
a) Gas supply and gas transit contracts are signed for 10 years;
b) Starting from 2010, the transit fee and the gas price will be calculated on a base of a clear formula (I hope this “Ukrainian formula” does already exist);
c) In 2009 there will be a fixed gas price for Ukraine, based on “average European gas price minus 20%”;
d) Transit fee in 2009 will stay at the level of 2008 – $1.7 per tcm for 100 km;
e) There will be no mediators in gas trade between Ukraine and Russia (but I think it’s early to say good bye to RosUkrEnergo as a player on European gas market).
Yulia Tymoshenko promised to make the new gas price public “in one-two days”, and it seems that the price is not agreed yet, despite of any paper signed. As the Russian TV reported, after signing the documents and press briefing Mrs. Tymoshenko went to the Gazprom office for some extra negotiations.
Talking about the gas price in 2010, I would like to propose a link, which leads to the fresh prognosis of Goldman Sachs Group Inc., forecasting “swift and violent rebound” in energy prices in the second half of the 2009.
Oil prices may have reached their lowest point already, after falling to $32.40 in mid-December, and are expected to rise to $65 by the end of this year, Goldman Sachs Group Inc. commodity analyst Jeffrey Currie said at a conference in London today. A recent tactic of using supertankers to store crude oil to take advantage of higher prices later this year is “difficult” to profit from and is “near the end of this process” anyway, the Goldman analyst said.
New York crude futures for delivery in December, trading near $56 a barrel, currently cost some $15 a barrel more than March futures, a market situation known as contango, where prices are higher for later delivery. The contango is likely to flatten as supply cuts by OPEC and other producers take effect, reducing the availability of oil for immediate delivery, Mr. Currie said.
Why I suggested that the gas price for Ukraine will be around $320 per tcm in 2009? My thoughts were based on three things:
1. Ukrainian negotiators were insisting on fixed gas price (I was pleasantly surprised when I’ve heard today that the gas price formula has been worked out for Ukraine).
2. The Prime Minister of Russia Vladimir Putin, President Dmitri Medvedev and the head of Gazprom Alexei Miller were declaring the “European price” for Ukraine at the level of $450 per tcm (last time Mr. Putin told that on Saturday, 17 January).
3. Gazprom has just switched to some “European formula” in his relations with Turkmenistan, and the price of Turkmen gas for Russians in the first quarter of 2009 will be about $300 per tcm.
It seemed logical to assume that the gas price for Ukraine should be at least more than $300. It is really great if the today’s statement of Prime Minister of Ukraine Yulia Tymoshenko is true, and Naftogaz will pay only around $235-250 per tcm. (She also told that the 20% discount will save $5 billion, which is possible when the price is $220). It would be like a miracle, if the average price for Ukraine were $199 as was suggested by the Secretariat of Ukrainian President. But we have to think, why Moscow agreed for such a low price level, as the Gazprom is clearly not a charity foundation, especially at crisis times.
Anyway, it is still difficult to say, how much Ukraine will pay for gas in 2009. There is not much information about the gas supply contract at all. Here is all I know today:
a) Gas supply and gas transit contracts are signed for 10 years;
b) Starting from 2010, the transit fee and the gas price will be calculated on a base of a clear formula (I hope this “Ukrainian formula” does already exist);
c) In 2009 there will be a fixed gas price for Ukraine, based on “average European gas price minus 20%”;
d) Transit fee in 2009 will stay at the level of 2008 – $1.7 per tcm for 100 km;
e) There will be no mediators in gas trade between Ukraine and Russia (but I think it’s early to say good bye to RosUkrEnergo as a player on European gas market).
Yulia Tymoshenko promised to make the new gas price public “in one-two days”, and it seems that the price is not agreed yet, despite of any paper signed. As the Russian TV reported, after signing the documents and press briefing Mrs. Tymoshenko went to the Gazprom office for some extra negotiations.
Talking about the gas price in 2010, I would like to propose a link, which leads to the fresh prognosis of Goldman Sachs Group Inc., forecasting “swift and violent rebound” in energy prices in the second half of the 2009.
Oil prices may have reached their lowest point already, after falling to $32.40 in mid-December, and are expected to rise to $65 by the end of this year, Goldman Sachs Group Inc. commodity analyst Jeffrey Currie said at a conference in London today. A recent tactic of using supertankers to store crude oil to take advantage of higher prices later this year is “difficult” to profit from and is “near the end of this process” anyway, the Goldman analyst said.
New York crude futures for delivery in December, trading near $56 a barrel, currently cost some $15 a barrel more than March futures, a market situation known as contango, where prices are higher for later delivery. The contango is likely to flatten as supply cuts by OPEC and other producers take effect, reducing the availability of oil for immediate delivery, Mr. Currie said.
Sunday, January 18, 2009
Double-cross. New gas agreement with Russia will cost Ukraine from 3 to 4 billion dollars.
Today (at night actually) the Prime Minister of Ukraine Yulia Tymoshenko reached a preliminary agreement with the Prime Minister of Russia Vladimir Putin on gas supply to Ukraine in 2009-2010: Ukraine will switch to “European price” with the 20% discount, and the gas transit fee will stay at the previous level.
In my previous post I gave the main figures of Russia-Ukraine gas trade. I mentioned that if Ukraine had agreed for Russian December proposal of gas price of $250 per tcm and unchanged transit fee of $1.7 per 1 tcm for 100 km, Kiev would pay to Russians around $3.85 billion more in 2009. But in new reality the losses of Ukrainian economy will be much more significant.
If the “average European price” is $400 per 1 tcm (Russian authorities have previously declared that it may be up to $460), Ukrainian price for this year would be around $320 per tcm. Ukraine consumes 55 bcm of gas every year, this amount costs $17.6 billion. So, this year Ukraine will overpay the price-2008 on $7.727 billion.
Direct loss of a non-signing of gas supply contract on conditions, proposed by Russia in December, is $3.877 billion (if the price-2009 is $320 per tcm). Even if the price will be different – higher or lower – Ukraine will lose from 3 to 4 billion dollars of budget money. The extra losses of January gas conflict: the cut of budget revenues due to the stoppage of work of more than 20 biggest plants and factories, further gas price raise on the internal market, and a dramatic damage of image of Ukraine as a business partner and predictable democratic country. And how can we call this if not the betrayal of the State interests?
It will be possible to smooth over the budget damage if Ukraine have the permission to perform re-export of gas to Europe (at European prices): financial crisis decreased the gas consumption, Ukraine also has significant amounts of gas in storages, and it can just sell the excesses. But there is no information, if Gazprom will give to Naftogaz Ukraine the re-export permission.
The agreement on gas supply to Ukraine in 2009-2010 is supposed to be signed on 19 December.
In my previous post I gave the main figures of Russia-Ukraine gas trade. I mentioned that if Ukraine had agreed for Russian December proposal of gas price of $250 per tcm and unchanged transit fee of $1.7 per 1 tcm for 100 km, Kiev would pay to Russians around $3.85 billion more in 2009. But in new reality the losses of Ukrainian economy will be much more significant.
If the “average European price” is $400 per 1 tcm (Russian authorities have previously declared that it may be up to $460), Ukrainian price for this year would be around $320 per tcm. Ukraine consumes 55 bcm of gas every year, this amount costs $17.6 billion. So, this year Ukraine will overpay the price-2008 on $7.727 billion.
Direct loss of a non-signing of gas supply contract on conditions, proposed by Russia in December, is $3.877 billion (if the price-2009 is $320 per tcm). Even if the price will be different – higher or lower – Ukraine will lose from 3 to 4 billion dollars of budget money. The extra losses of January gas conflict: the cut of budget revenues due to the stoppage of work of more than 20 biggest plants and factories, further gas price raise on the internal market, and a dramatic damage of image of Ukraine as a business partner and predictable democratic country. And how can we call this if not the betrayal of the State interests?
It will be possible to smooth over the budget damage if Ukraine have the permission to perform re-export of gas to Europe (at European prices): financial crisis decreased the gas consumption, Ukraine also has significant amounts of gas in storages, and it can just sell the excesses. But there is no information, if Gazprom will give to Naftogaz Ukraine the re-export permission.
The agreement on gas supply to Ukraine in 2009-2010 is supposed to be signed on 19 December.
Saturday, January 17, 2009
Transit myth. The raise of the fee for gas transit via Ukrainian pipeline system will not make up the extra-expenses for European level gas prices.
According to the info we’ve got now, the Gas summit in Moscow ends without any significant result – at least in frames of bilateral Gazprom-Naftogaz negotiations on gas supply to Ukraine. Nevertheless Europeans may count on re-establishment of gas flow next week, but Ukraine is not likely to sign any contract today for its own energy needs. Though Vice Prime Minister of Ukraine Oleksandr Turchynov told yesterday that today Mrs. Tymoshenko will achieve the total agreement with her Russian counterpart. At the time I’m writing these words Yulia Tymoshenko and Vladimir Putin are still talking in private somewhere in Russian White House, and my story will not be about them. I would like to say a couple of words to unveil a very popular statement of Ukrainian top politicians, claiming that Ukraine will gain super-profits after switching to European level of gas transit prices. That’s not true.
I wrote about the transit-fee-myth in the Ukrainian Ekonomicheskie izvestia (Economic News) newspaper in 2004 and especially in 2005, when – after Orange revolution – the President of Ukraine Viktor Yushchenko, Prime Minister Yulia Tymoshenko and people from Government started to declare their will to move to the European level of prices for gas from Russia. I guess they hadn’t read my articles or just didn’t care about profits of Ukraine, and the “fruitful” negotiations with Russians ended in ruining of the existed agreement on gas price for Ukraine of $50, established until 2009. The transit fee rose from $1.09 per 1 tcm (thousand cubic meters) for 100 km to $ 1.6 ($1.7 in 2008), but that hadn’t influence the harm for Ukrainian economy. Today Ukrainian officials are actively declaring again that the raise of the transit fee to the European level will be profitable for Ukraine.
Here are some figures. In 2008 Ukraine transported around 120 bcm (billion cubic meters) of Russian gas to Europe. The length of Ukrainian export pipelines is up to 120 km (let’s take the average – 110 km). So, last year (not taking to the account the fact that some amounts of transit money went for old-debts-payments) Ukraine received from Russia approximately $2.057 billion. The same time Ukraine bought 55 bcm of gas from Russia, paying $179.5 per tcm – the check was $9.873 billion.
Ok. Let’s imagine that Ukraine raises the transit fee to the average European level. The President of Russia told it’s $3.4 per 1 tcm for 100 km. As a result Ukraine will receive twice more transit money from Russia – $4.114 billion. But the price of gas will be raised also; it will be from 350 to 450, as I can understand the Russian Gazprom’s mathematics. So, Ukraine will have to pay not around 10, but around 20 billion dollars, gaining 2 billion from transit-fee-raise. If Ukraine agreed for Russian proposal of gas price $250 with transit fee of $1,7, it would have to pay to Russia (literally – RosUkrEnergo) twice less – around $3.85 billion more. I would like to remind here that Ukraine has to pay more every year since it declared the will to move to European level of gas prices during three years.
I wrote about the transit-fee-myth in the Ukrainian Ekonomicheskie izvestia (Economic News) newspaper in 2004 and especially in 2005, when – after Orange revolution – the President of Ukraine Viktor Yushchenko, Prime Minister Yulia Tymoshenko and people from Government started to declare their will to move to the European level of prices for gas from Russia. I guess they hadn’t read my articles or just didn’t care about profits of Ukraine, and the “fruitful” negotiations with Russians ended in ruining of the existed agreement on gas price for Ukraine of $50, established until 2009. The transit fee rose from $1.09 per 1 tcm (thousand cubic meters) for 100 km to $ 1.6 ($1.7 in 2008), but that hadn’t influence the harm for Ukrainian economy. Today Ukrainian officials are actively declaring again that the raise of the transit fee to the European level will be profitable for Ukraine.
Here are some figures. In 2008 Ukraine transported around 120 bcm (billion cubic meters) of Russian gas to Europe. The length of Ukrainian export pipelines is up to 120 km (let’s take the average – 110 km). So, last year (not taking to the account the fact that some amounts of transit money went for old-debts-payments) Ukraine received from Russia approximately $2.057 billion. The same time Ukraine bought 55 bcm of gas from Russia, paying $179.5 per tcm – the check was $9.873 billion.
Ok. Let’s imagine that Ukraine raises the transit fee to the average European level. The President of Russia told it’s $3.4 per 1 tcm for 100 km. As a result Ukraine will receive twice more transit money from Russia – $4.114 billion. But the price of gas will be raised also; it will be from 350 to 450, as I can understand the Russian Gazprom’s mathematics. So, Ukraine will have to pay not around 10, but around 20 billion dollars, gaining 2 billion from transit-fee-raise. If Ukraine agreed for Russian proposal of gas price $250 with transit fee of $1,7, it would have to pay to Russia (literally – RosUkrEnergo) twice less – around $3.85 billion more. I would like to remind here that Ukraine has to pay more every year since it declared the will to move to European level of gas prices during three years.
Tuesday, January 13, 2009
Parliamentary Control. Starting from today, a special Investigation Commission of MPs will follow the gas negotiations between Ukraine and Russia.
Today the Parliament of Ukraine has founded a Temporary Investigation Parliamentary Commission to follow all the developments of current gas crisis. The Committee is going to examine the actions of Ukrainian officials in the sphere of gas supply and gas transit in 2008, and also will follow the negotiations with Russian Gazprom in 2009. The questions of signing the new gas supply and transit contracts – including financial issues, like gas price – will be under everyday control of the Commission.
222 MPs voted in favour of the Commission’s founding: 174 members of the Party of Regions (total size of faction – 175 MPs), 27 members of Communist party (total size – 27), and 19 members of the Block of the Speaker Lytvyn (total size – 19). The Block of Prime Minister Yulia Tymoshenko (BYT) and all the faction Our Ukraine – People Self-Defence (OU-PSD) didn’t support the idea of establishing the parliamentary control of gas problematic.
The new-elected Head of the Temporary Investigation Commission Inna Bogoslovska (member of the Party of Regions) promised to give the information on its findings to press every three days. “Our task is to speed up the signing of two contracts”, Inna Bogoslovska explained. On 6 February the preliminary report of the Commission will be presented in Parliament. The Commission (according to the size of every faction, it comprises 4 MPs from the Party of Regions, 3 MPs from the BYT, 2 MPs from the OU-PSD, 1 MP from BL and one Communist) is going to work during two months.
“It may well happen that, according to the results of this Commission’s activities, the question on the impeachment of President and the resignation of Government will be raised”, Inna Bogoslovska said. The leader of the Party of Regions Viktor Yanukovych went further today, calling for the immediate Government resignation. The Communist party on its turn proposed to start the impeachment procedure as soon as possible.
P.S. I’m not going to comment a lot the today’s “blockade” of Russian gas transit to Europe as I still think that this “problem” is staged by some forces from Russia AND Ukraine. I would only add one point concerning the gas interests of Russia. It is important to pay attention to one interesting figure the Prime Minister of Russia Vladimir Putin mentioned during his meeting with foreign journalists last week. He told that Russia might pay for the Middle Asian gas “on average $375 per tcm” in 2009. As the European gas prices (in most of the EU countries) are linked to the oil prices, and the oil prices are still falling despite of all the Russian efforts and the statements of the OPEC countries, it is reasonable for Moscow just to win time for extra negotiations, in particular, with the successor of Turkmenbashi. But I have to say that Russia will have to re-start gas export to Europe in a very short time – there are simply not enough of gas storage facilities on the Russian territory. In a while Moscow will face only two choices: to transit the gas to Europe or to burn it (or to close some gas wells), losing money Gazprom needs too much today.
222 MPs voted in favour of the Commission’s founding: 174 members of the Party of Regions (total size of faction – 175 MPs), 27 members of Communist party (total size – 27), and 19 members of the Block of the Speaker Lytvyn (total size – 19). The Block of Prime Minister Yulia Tymoshenko (BYT) and all the faction Our Ukraine – People Self-Defence (OU-PSD) didn’t support the idea of establishing the parliamentary control of gas problematic.
The new-elected Head of the Temporary Investigation Commission Inna Bogoslovska (member of the Party of Regions) promised to give the information on its findings to press every three days. “Our task is to speed up the signing of two contracts”, Inna Bogoslovska explained. On 6 February the preliminary report of the Commission will be presented in Parliament. The Commission (according to the size of every faction, it comprises 4 MPs from the Party of Regions, 3 MPs from the BYT, 2 MPs from the OU-PSD, 1 MP from BL and one Communist) is going to work during two months.
“It may well happen that, according to the results of this Commission’s activities, the question on the impeachment of President and the resignation of Government will be raised”, Inna Bogoslovska said. The leader of the Party of Regions Viktor Yanukovych went further today, calling for the immediate Government resignation. The Communist party on its turn proposed to start the impeachment procedure as soon as possible.
P.S. I’m not going to comment a lot the today’s “blockade” of Russian gas transit to Europe as I still think that this “problem” is staged by some forces from Russia AND Ukraine. I would only add one point concerning the gas interests of Russia. It is important to pay attention to one interesting figure the Prime Minister of Russia Vladimir Putin mentioned during his meeting with foreign journalists last week. He told that Russia might pay for the Middle Asian gas “on average $375 per tcm” in 2009. As the European gas prices (in most of the EU countries) are linked to the oil prices, and the oil prices are still falling despite of all the Russian efforts and the statements of the OPEC countries, it is reasonable for Moscow just to win time for extra negotiations, in particular, with the successor of Turkmenbashi. But I have to say that Russia will have to re-start gas export to Europe in a very short time – there are simply not enough of gas storage facilities on the Russian territory. In a while Moscow will face only two choices: to transit the gas to Europe or to burn it (or to close some gas wells), losing money Gazprom needs too much today.
Sunday, January 11, 2009
High Treason – II. Some conclusions from the Cold War started by Russia-Ukraine gas dispute.
The Gas Cold War 2009 caused by the Russia-Ukraine gas dispute has not finished yet, but we can already make some important conclusions. Sitting in the cold Kiev flat (we’ve got very low pressure in central heating system), I will try to give my point of view as briefly as possible.
Conclusion 1. The indisputable winner of the Gas Cold War 2009 is Russia and Russian Gazprom.
I would not agree with some observers who say that the image of Russia as a reliable gas supplier and the Gazprom as a relevant business partner suffered a lot. Europe and Europeans may think and feel whatever they want, but it is really impossible to replace more than 160 billion of cubic meters of Russian gas with some alternative source of energy. So, Europe will stay dependent on Russian gas supply, whatever the image of Russia will be.
Actually Russian Gazprom has already received a lot of profits from the Cold War:
1. Gas prises. European consumers were predicting the Russian gas average prices for Europe to fall to around $320 per tcm (thousand cubic metres) in 2009 due to the low oil prices level. New Cold War led to rise of the oil demand in Europe as of the alternative energy resource, and this will prevent the significant fall of gas prices.
2. Alternative pipeline projects. Gazprom currently has two new gas pipelines projects: the Nord Stream pipeline, which runs under the Baltic sea from Russian Vyborg to German Greifswald, and the South Stream, which will cross the Black Sea to Bulgaria and then split in the direction of Austria and Greece. Both pipelines will definitely get bigger support of the European companies, as the alternative for “non-adequate” Ukrainian route. (Though Ukrainian route cannot be eliminated as it transports around 80% of Russian gas export to Europe).
3. Punching Ukraine. Undermining the image of Ukraine and its President Viktor Yushchenko was a “pleasant revenge” of Russia and its top-authorities for Orange Revolution, support of Georgia, and Holodomor festivities. After this crisis nobody (except of some ultra-pro-Ukrainian-idealists) in Europe would think seriously about the possibility for Ukraine to join the EU earlier than in 100 years, and nobody in NATO would seriously consider future Ukrainian full membership in the Alliance.
4. Extra money. The crises appeared to become the real opportunity to rise gas prices for Ukraine and to get extra-profits.
Conclusion 2. The Gas Cold War was artificially organized.
Of course, Ukraine could sign the gas supply agreement with Russia before the New Year and prevent the crisis. Gazprom proposed the price of $250 per tcm, which is acceptable for Ukraine and its economy (in case of proper management of the State Oli and Gas Company Naftogaz Ukraine and fair distribution of up to 18 billion cubic meters of gas the Ukraine is producing by itself every year. The price of $250 is logical: last year Ukraine was paying $179,5 per tcm, and there is an agreement that the price will raise gradually to the European level during three years. It is approximately plus $70-80-90 every year, so, Russians should charge $250 or even more, and it was predictable.
But the gas agreement with Russia was not signed, and the Ukrainian officials who refused to sign the documents were consciously provoking the gas crisis. No agreement – no supplies, even a schoolboy may predict such a situation. Some Naftogaz officials said that the President of Ukraine Viktor Yushchenko prohibited signing of this agreement. It sounds unconvincing, as at that time nobody, including the Prime Minister of Ukraine Yulia Tymoshenko, made any rough statement on this point. It is also very naïve to think that the Gazprom and Naftogaz Ukraine really have communication problems and cannot reach a deal on gas supply to Ukraine. It’s unbelievable even if we take to the account the fact that the Head of Naftogaz Oleg Dubyna is flying in one plane with his Gazprom counterpart Aleksei Miller.
So, the gas crisis was surely staged by Kremlin and by some high authorities in Ukraine. Viktor Yushchenko is not among them, though he didn’t do anything (he could do a lot) to prevent the Gas Cold War. I would also add that the Head of Naftogaz Ukraine Oleg Dubyna was appointed to his position by the Yulia Tymoshenko’s quota, and that he is in very close relations with the Industrial Union of Donbass business group, which has permanent conflict of interests with “gas trade middleman” Dmytro Firtash who controls half of the “RosUkrEnergo” intermediate company.
Conclusion 3. In frames of Ukrainian domestic politics the gas crisis played not in favour of President Yushchenko.
Everyone might notice that the President of Ukraine was trying not to be involved into the gas crisis from the very start. He was mentioned a lot by all the participants of the negotiations (in positive and negative manner), he made some phone calls to his counterparts in Europe and to Russian President Dmitriy Medvedev, but he was avoiding to get inside the negotiations and discussions by himself. Why? It seems that he has a very vulnerable position, when one is talking about the gas supply question. During his Presidency, Mr. Yushchenko has been accused a lot of times in having some profits from the work of the RosUkrEnergo. In particular some people were accusing Mr. Firtash in paying some bills for Kateryna Chumachenko, the wife of the President. These accusations were never proved, but also never dishonoured, though Viktor Yushchenko could for example appeal to courts. If these accusations were true (even semi-true), Viktor Yushchenko is going to lose one of the main sources of his financial support before the Presidential election. By the way, some of the money may be re-transferred in favour of Mrs. Tymoshenko, if we just hypothetically assume that the Itera Company of Igor Makarov may come back to the big gas-supply scene as some people say.
Conclusion 4. The main loser of the Cold War is Ukraine as a country, its economy, and the State oil and gas company Naftogaz Ukraine (but not the current management of this company).
In the geopolitical sense the image of Ukraine as a country (and as a democratic country in particular) has suffered a lot. The New Cold War has demonstrated that Ukraine is totally unpredictable, since the actions of its authorities and state companies are based on the today’s interests of domestic politics, rather than on long-term programmes or interests of the country. Despite of the declarations about the dedication to the democratic ideals and the European course of current leaders of Ukraine, they showed up as a real threat to Europe, European economy and even to the health of the citizens of the European States.
The State Oil and Gas Company Naftogaz Ukraine is close to bankruptcy today. Though I am sure that with normal management this company may easily become a mail financial supplier of Ukrainian budget. (I was trying to make some calculations earlier, and maybe will publish the results here one day, of course, after careful self-proof-reading).
Conclusion 5. The intermediate gas supply company RosUkrEnergo may seem to be a loser, but is not.
The intermediate company RosUkrEnergo also may be considered as a loser in the New Cold War as it will probably be eliminated from Russia-Ukraine gas trade scheme. But I don’t think this statement is true, taking to the account billions dollars of profit RosUkrEnergo had received during the last four years, operating in the sphere of the re-export of gas from Russia to Ukraine and Europe (Hungary, Romania, Poland and Slovakia) and gas trade inside the domestic market of Ukraine. Half owned by Gazprom, RosUkrEnergo was founded as a temporary source of profits, and now it’s just a time for something new. I will not be surprised if Mr. Firtash would be among founders of a new gas trade company who will operate on European – and Ukrainian – markets in coming years.
Conclusion 6. The Europe, still suffering from lack of gas supply, may be considered as a loser also, and the object of manipulation as well.
Conclusion 7. The Cold War is an evidence of a betrayal of the interests of Ukraine by its highest authorities – President, Prime Minister, and Head of State Oil and Gas Company. Their actions and failure to act as well may be called as a high treason with all the consequences it should cause.
Conclusion 1. The indisputable winner of the Gas Cold War 2009 is Russia and Russian Gazprom.
I would not agree with some observers who say that the image of Russia as a reliable gas supplier and the Gazprom as a relevant business partner suffered a lot. Europe and Europeans may think and feel whatever they want, but it is really impossible to replace more than 160 billion of cubic meters of Russian gas with some alternative source of energy. So, Europe will stay dependent on Russian gas supply, whatever the image of Russia will be.
Actually Russian Gazprom has already received a lot of profits from the Cold War:
1. Gas prises. European consumers were predicting the Russian gas average prices for Europe to fall to around $320 per tcm (thousand cubic metres) in 2009 due to the low oil prices level. New Cold War led to rise of the oil demand in Europe as of the alternative energy resource, and this will prevent the significant fall of gas prices.
2. Alternative pipeline projects. Gazprom currently has two new gas pipelines projects: the Nord Stream pipeline, which runs under the Baltic sea from Russian Vyborg to German Greifswald, and the South Stream, which will cross the Black Sea to Bulgaria and then split in the direction of Austria and Greece. Both pipelines will definitely get bigger support of the European companies, as the alternative for “non-adequate” Ukrainian route. (Though Ukrainian route cannot be eliminated as it transports around 80% of Russian gas export to Europe).
3. Punching Ukraine. Undermining the image of Ukraine and its President Viktor Yushchenko was a “pleasant revenge” of Russia and its top-authorities for Orange Revolution, support of Georgia, and Holodomor festivities. After this crisis nobody (except of some ultra-pro-Ukrainian-idealists) in Europe would think seriously about the possibility for Ukraine to join the EU earlier than in 100 years, and nobody in NATO would seriously consider future Ukrainian full membership in the Alliance.
4. Extra money. The crises appeared to become the real opportunity to rise gas prices for Ukraine and to get extra-profits.
Conclusion 2. The Gas Cold War was artificially organized.
Of course, Ukraine could sign the gas supply agreement with Russia before the New Year and prevent the crisis. Gazprom proposed the price of $250 per tcm, which is acceptable for Ukraine and its economy (in case of proper management of the State Oli and Gas Company Naftogaz Ukraine and fair distribution of up to 18 billion cubic meters of gas the Ukraine is producing by itself every year. The price of $250 is logical: last year Ukraine was paying $179,5 per tcm, and there is an agreement that the price will raise gradually to the European level during three years. It is approximately plus $70-80-90 every year, so, Russians should charge $250 or even more, and it was predictable.
But the gas agreement with Russia was not signed, and the Ukrainian officials who refused to sign the documents were consciously provoking the gas crisis. No agreement – no supplies, even a schoolboy may predict such a situation. Some Naftogaz officials said that the President of Ukraine Viktor Yushchenko prohibited signing of this agreement. It sounds unconvincing, as at that time nobody, including the Prime Minister of Ukraine Yulia Tymoshenko, made any rough statement on this point. It is also very naïve to think that the Gazprom and Naftogaz Ukraine really have communication problems and cannot reach a deal on gas supply to Ukraine. It’s unbelievable even if we take to the account the fact that the Head of Naftogaz Oleg Dubyna is flying in one plane with his Gazprom counterpart Aleksei Miller.
So, the gas crisis was surely staged by Kremlin and by some high authorities in Ukraine. Viktor Yushchenko is not among them, though he didn’t do anything (he could do a lot) to prevent the Gas Cold War. I would also add that the Head of Naftogaz Ukraine Oleg Dubyna was appointed to his position by the Yulia Tymoshenko’s quota, and that he is in very close relations with the Industrial Union of Donbass business group, which has permanent conflict of interests with “gas trade middleman” Dmytro Firtash who controls half of the “RosUkrEnergo” intermediate company.
Conclusion 3. In frames of Ukrainian domestic politics the gas crisis played not in favour of President Yushchenko.
Everyone might notice that the President of Ukraine was trying not to be involved into the gas crisis from the very start. He was mentioned a lot by all the participants of the negotiations (in positive and negative manner), he made some phone calls to his counterparts in Europe and to Russian President Dmitriy Medvedev, but he was avoiding to get inside the negotiations and discussions by himself. Why? It seems that he has a very vulnerable position, when one is talking about the gas supply question. During his Presidency, Mr. Yushchenko has been accused a lot of times in having some profits from the work of the RosUkrEnergo. In particular some people were accusing Mr. Firtash in paying some bills for Kateryna Chumachenko, the wife of the President. These accusations were never proved, but also never dishonoured, though Viktor Yushchenko could for example appeal to courts. If these accusations were true (even semi-true), Viktor Yushchenko is going to lose one of the main sources of his financial support before the Presidential election. By the way, some of the money may be re-transferred in favour of Mrs. Tymoshenko, if we just hypothetically assume that the Itera Company of Igor Makarov may come back to the big gas-supply scene as some people say.
Conclusion 4. The main loser of the Cold War is Ukraine as a country, its economy, and the State oil and gas company Naftogaz Ukraine (but not the current management of this company).
In the geopolitical sense the image of Ukraine as a country (and as a democratic country in particular) has suffered a lot. The New Cold War has demonstrated that Ukraine is totally unpredictable, since the actions of its authorities and state companies are based on the today’s interests of domestic politics, rather than on long-term programmes or interests of the country. Despite of the declarations about the dedication to the democratic ideals and the European course of current leaders of Ukraine, they showed up as a real threat to Europe, European economy and even to the health of the citizens of the European States.
The State Oil and Gas Company Naftogaz Ukraine is close to bankruptcy today. Though I am sure that with normal management this company may easily become a mail financial supplier of Ukrainian budget. (I was trying to make some calculations earlier, and maybe will publish the results here one day, of course, after careful self-proof-reading).
Conclusion 5. The intermediate gas supply company RosUkrEnergo may seem to be a loser, but is not.
The intermediate company RosUkrEnergo also may be considered as a loser in the New Cold War as it will probably be eliminated from Russia-Ukraine gas trade scheme. But I don’t think this statement is true, taking to the account billions dollars of profit RosUkrEnergo had received during the last four years, operating in the sphere of the re-export of gas from Russia to Ukraine and Europe (Hungary, Romania, Poland and Slovakia) and gas trade inside the domestic market of Ukraine. Half owned by Gazprom, RosUkrEnergo was founded as a temporary source of profits, and now it’s just a time for something new. I will not be surprised if Mr. Firtash would be among founders of a new gas trade company who will operate on European – and Ukrainian – markets in coming years.
Conclusion 6. The Europe, still suffering from lack of gas supply, may be considered as a loser also, and the object of manipulation as well.
Conclusion 7. The Cold War is an evidence of a betrayal of the interests of Ukraine by its highest authorities – President, Prime Minister, and Head of State Oil and Gas Company. Their actions and failure to act as well may be called as a high treason with all the consequences it should cause.
Wednesday, May 7, 2008
Enthronement
Today, on 7 May 2008, Dmitri Medvedev took office as the third President of Russia. The half-of-an-hour inauguration ceremony which took place in Great Kremlin Palace’s throne hall was very interesting to watch and rather useful for future thoughts about the new "first face" of Russian politics. Of course, such events are planned in advance so thoroughly that one should not expect any surprise or clear sign of something. Nevertheless we can make some conclusions.The first conclusion: it is a big mistake to call Mr. Medvedev a “puppet president” (as, for example, Tony Halpin from The Times did in a recent article). Yes, the appointment (through the well organized elections) of Dmitri Medvedev as a President was grounded on decision of Vladimir Putin. But it is obvious that Mr. Putin hasn’t made that decision alone. We shouldn’t forget about the circumstances of Putin’s intronisation which took place 8 years ago. We shouldn’t forget about so called “Family” which still sharply controls Russian big economy and politics. So, the issue is much more complex than we can think "from the first sight".
I was watching the inauguration procedure on TV, sitting in cafe of one of the administrative buildings of the Parliament of Ukraine (Verkhovna Rada). The performance was really impressive.
…Immense mechanism of the Kremlin’s chiming clock started to count seconds left to 12 o’clock of Moscow time. With the loud accompaniment of clock bells future President of Russian Federation appeared in the gold-decorated hall, overcrowded with cream of the cream of Russian economy and political elite.
“Look, Russia has become a real empire. Medvedev will be like a Tsar of Russia”, - commented a woman-official with a cap of coffee, - Nobody can predict, what kind of President he is going to be. But I’m sure – he is not shy, he will show up brightly”. Her friend who prefers tea added with a bit of jealousy: “Today is a holiday for all the Russians, even government officials don’t work”.
Mr. Medvedev can not be described as a tall men. Actually his height is only 162 cm. But everyone who was observing the ceremony noticed that he didn’t look as not tall enough for the post of the President of Russia. Some features of the conduct of Dmitri Medvedev during the inauguration ceremony have shown that he is not going to stay a weak President as some well-known people want him to be.
Today Dmitri Medvedev is not pretending to dominate Vladimir Putin. But after the moment of exchange of a high status something changed – almost invisibly – in the relations between two Presidents, former and present. Dmitri Medvedev has not pretending to dominate, but he started to dominate, though in some little moments. For example, during the parade of the Presidential regiment it was not Dmitri Medvedev who started the conversation with his friend Vladimir Putin: the new President took a pause, while the old one couldn't.
42 years old Dmitri Medvedev is surely not a puppet president. He is rather a dark horse, a joker in the pack who can be easily transformed to any type of the Head of State. It seems to me that he will soon become a new authoritarian President of Russia – like Putin, but with different style.
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