Today the State oil and gas company Naftogaz Ukraine has paid $50 million to Russian Gazprom. Together with yesterday’s payment of $310 million it settles the gas supply bill of Ukraine for February 2009. Now all the Europe may breathe a sigh of relief: this month there will be no gas cut-off.
(Besides, I’ve noticed at least one mismatch – in figures. The figures I’ve mentioned above, given according to the information of the Secretariat of the President of Ukraine, have in total $360 million – which means that Ukraine imported only 1 billion cubic metres (bcm) of Russian gas in February. Gazprom’s officials have recently mentioned that Naftogaz has to pay $400 million. Hopefully it will not be a purpose for a new gas-fight between Ukraine and Russia).
Nevertheless, the gas supply remains in a center of a domestic turmoil in Ukraine. Muscular men wearing black masks and camouflage entered the Naftogaz Ukraine headquarters yesterday. They passed by the helpless company guards, and started to question the accountants of the company, and to search for something in the management office. All the main TV channels were translating this fascinating story in almost live regime (it’s a democracy!). “Armed people in camouflage pushed aside security, and showed no documents,” a spokesman of Naftogaz Valentyn Zemlyansky said to journalists.
The masked men appeared to be the secret service agents, who came to the Naftogaz Ukraine to take off the documents, related to Russian-Ukraine gas supply agreement, signed in January. The spokeswoman of the Security Service of Ukraine (SBU) Maryna Ostapenko informed press that the national security service is investigating criminal case on the illegal appropriation of 6,3 bcm of gas by the State company Naftogaz Ukraine. “Everything is within the frames of law”, Mrs. Ostapenko assured, and added that the Naftogaz authorities knew that the documents are to be seized that day. (The last remark explains such a huge media support of the action).
Anyway, the most interesting thing is not a scary picture, but the reasons of the scandal. As every contemporary problem in Ukraine, it has origins in the struggle for power between the President of Ukraine Viktor Yushchenko and the Prime Minister of Ukraine Yulia Tymoshenko.
The story begins in November 2008, when the Ukrainian Customs office refused to perform customs clearing of 11 bcm of Russian gas, pumped to Ukrainian gas storages by Russian Gazprom. The gas was dedicated for the well-known Swiss-registered intermediary RosUkrEnergo, half owned by Gazprom, and half – by Ukrainian billionaire Dmytro Firtash. The Customs of Ukraine bonded all the amount of gas (for some reasons), until the gas conflict with Russia started. (Here I would like to suppose again that the gas “war” with Russia was a planned thing).
In January 2009 – in frames of a settlement of the Russia-Ukraine gas dispute – Russians transferred to Naftogaz Ukraine the rights to claim from RosUkrEnergo the debt, which it has to Gazprom. The same time Russia received a 20 per cent discount on pipeline transit fees. A new set of bilateral Agreements eliminated RosUkrEnergo from Russia-Ukraine gas trading scheme.
As the PM says, Gazprom agreed to give the gas to Ukraine at a privileged price of $1,7 billion for all the 11 bcm of gas, and these money were to be considered as a payment for a transit of Russian gas to Europe. (I haven’t seen the documents, but it sounds like a true). This fact permitted to the Prime Minister Yulia Tymoshenko to declare that the average gas price for Ukraine in 2009 is $228 per tcm.
After the signing of the Agreements with Gazprom, Naftogaz Ukraine faced a new problem: a Head of the State Customs office of Ukraine Valery Khoroshkovsky refused to perform a custom clearing of mentioned amount of gas. He claimed the gas belongs to RosUkrEnergo.
The Prime Minister solved the problem: Mr. Khoroshkovsky was fired. But the President appointed him as a Deputy Head of the Security Service of Ukraine (SBU).
At long last, the Ukrainian Customs released the 11 bcm of ex-RosUkrEnergo-gas from the bond – in favour of the State company Naftogaz Ukraine. After that the SBU started the investigation mentioned above. On 3 March at night Deputy Head of the department of Energy Customs office Taras Shepitko was arrested. The next day men in mask appeared on the threshold of Naftogaz.
As for this moment, there is a ruling of a court, which states the SBU should stop the actions concerning the mentioned Naftogaz-case. Pro-presidential and pro-government experts are giving controversial comments. RosUkrEnergo still insists that is owns the gas. Gazprom didn’t make any statements concerning this concrete question.
Mrs. Tymoshenko is condemning the actions of the SBU. “They simply wanted to paralyze the activities of Naftogaz and destroy the gas distribution system in Ukraine,” she said. She also accused Mr. Yushchenko of lobbying on behalf of RosUkrEnergo. First Vice Prime Minister Alexander Turchynov also declared yesterday that “Viktor Yushchenko was patronizing RosUkrEnergo”, and that Mr. Khoroshkovsky “has joint business with Mr. Firtash”.
The press secretary of the President of Ukraine Iryna Vannikova informed yesterday that “President fully supports the actions of the SBU”. “The Security Service acts in frames of law. The actions of the Security Service agents are rather tough, but it is a demand of the circumstances of this case, - Mrs. Vannikova said. - President is sure that it is necessary to show a determination and insistence in the investigation of the identified corrupt practices”.
Showing posts with label gas price. Show all posts
Showing posts with label gas price. Show all posts
Thursday, March 5, 2009
Sunday, February 8, 2009
Hugging to Death. The gas consortium of Ukraine, Russia, and Europe will not solve a problem of EU energy security, but undermine Ukrainian interests.
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.
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.
Saturday, January 31, 2009
The theater of the absurd. President Yushchenko's address to the Ukrainian nation - full text.
State of Ukrainian politics is getting worse, more and more resembling the theater of the absurd. I would like to give here a full text of President Yushchenko's urgent televised address to the Ukrainian nation of 30 January 2009 (the official tanslation, provided by the Press office of President).
Dear fellow countrymen,
I decided to address you to provide clear and honest information on economic, budgetary and financial situation in Ukraine. I appeal to you, dear fellow countrymen, to back up the demand to Ukrainian government and parliamentary majority to stop the flow of lie, hypocrisy, aspersions and to immediately, I emphasize that, immediately start acting to save national economy.
The state has absolutely misbalanced financial system.State institutions are knowingly being ruined because of lack of financing. I am not speaking of personal accusations now. I leave this dirt aside.
We were witnesses to a witches’ sabbath in the parliament around the question of the National Bank. It was evidently explained by single intention – to gain access to money printing in order to cover losses in the State Budget. This can result in inflation unseen before. This can result in social catastrophe. I am forced to say this to bring politicians round. Ukrainian industry is falling. People are being fired or forced to long-term leaves. In Moscow, Prime Minister Yulia Tymoshenko made gas deals disadvantageous for Ukraine. The contracts do not correspond with my directives.
The Prime Minister made that decision personally, without consulting collegial opinion of the government. The majority, supporting Yulia Tymoshenko, beginning with her block and to communists, must explain this. The state was put before the fact. The contracts were signed and we must abide by them. In 2009 Ukraine will have to pay for gas 25 billion hryvnyas more than last year. However, Naftogaz’s profit from the transit remains the same as in 2008.The Prime Minister undoubtedly knows that finding additional resources to pay for gas is only possible at internal market, meaning increase of prices for the consumers. Every passing minute is priceless now.
I demand immediate alterations to 2009 State Budget. This is the only way to put things right. I have warned the government and parliamentary majority, who were authors of this year’s state budget, that the document is a cloud-castle. For today the government has not collected even a half of the amount of taxes and dues, planned for January. The cause is the same again – unreal budget. My conclusions are based on evaluation by Minister of Finance Viktor Pynzenyk. The opinion of this Minister is decisive in preparation of estimate in any state. Today he is not heard, first of all in the government.
I address Yulia Tymoshenko and the majority she has organized. This is your responsibility. Respected Yulia Volodymyrivna, you knowingly put unrealistically high numbers and promises into the budget, which you are unable to keep up to today. The funds, including those meant for next repayment of savings, are not concentrated, they are scattered. I address each deputy from Yulia Tymoshenko’s majority. Respected deputy, you support populism, which will tomorrow result in unpaid wages, pensions, scholarships, and other social support. I emphasize that – it is your responsibility. Because of your silent consent – doctors, teachers, and military men will not get their money. There will be no funds for schools or hospitals. You will be answering for that before Ukrainian people.
I address Verkhovna Rada Speaker Volodymyr Lytvyn. Respected Volodymyr Mykhaylovych, you perfectly understand that current budget is top provocative factor to the crisis in Ukraine. For the sake of state interests I ask you to consolidate the parliament to make alterations to the budget and approve urgent anti-crisis decisions. On behalf of the whole country I demand that the government and the parliament immediately worked out honest budget, where expenses would correspond with capabilities of the economy. This is your constitutional, state and political duty.
I emphasize – all the responsibility for economic situation, for disruption of budgetary process, for destruction of banks system in accordance with the Constitution is upon Prime Minister Yulia Tymoshenko in person. When she reaches deadline, she will not be able to hide in opposition. Enough lies.
I appeal to all fellow countrymen to stay calm. You will be protected. We are able to protect the country and people. The most important thing now is to find political will and courage and to approve a realistic budget for 2009.In order to achieve that I will use all instruments necessary in the state of crisis.
Dear fellow countrymen,
I decided to address you to provide clear and honest information on economic, budgetary and financial situation in Ukraine. I appeal to you, dear fellow countrymen, to back up the demand to Ukrainian government and parliamentary majority to stop the flow of lie, hypocrisy, aspersions and to immediately, I emphasize that, immediately start acting to save national economy.
The state has absolutely misbalanced financial system.State institutions are knowingly being ruined because of lack of financing. I am not speaking of personal accusations now. I leave this dirt aside.
We were witnesses to a witches’ sabbath in the parliament around the question of the National Bank. It was evidently explained by single intention – to gain access to money printing in order to cover losses in the State Budget. This can result in inflation unseen before. This can result in social catastrophe. I am forced to say this to bring politicians round. Ukrainian industry is falling. People are being fired or forced to long-term leaves. In Moscow, Prime Minister Yulia Tymoshenko made gas deals disadvantageous for Ukraine. The contracts do not correspond with my directives.
The Prime Minister made that decision personally, without consulting collegial opinion of the government. The majority, supporting Yulia Tymoshenko, beginning with her block and to communists, must explain this. The state was put before the fact. The contracts were signed and we must abide by them. In 2009 Ukraine will have to pay for gas 25 billion hryvnyas more than last year. However, Naftogaz’s profit from the transit remains the same as in 2008.The Prime Minister undoubtedly knows that finding additional resources to pay for gas is only possible at internal market, meaning increase of prices for the consumers. Every passing minute is priceless now.
I demand immediate alterations to 2009 State Budget. This is the only way to put things right. I have warned the government and parliamentary majority, who were authors of this year’s state budget, that the document is a cloud-castle. For today the government has not collected even a half of the amount of taxes and dues, planned for January. The cause is the same again – unreal budget. My conclusions are based on evaluation by Minister of Finance Viktor Pynzenyk. The opinion of this Minister is decisive in preparation of estimate in any state. Today he is not heard, first of all in the government.
I address Yulia Tymoshenko and the majority she has organized. This is your responsibility. Respected Yulia Volodymyrivna, you knowingly put unrealistically high numbers and promises into the budget, which you are unable to keep up to today. The funds, including those meant for next repayment of savings, are not concentrated, they are scattered. I address each deputy from Yulia Tymoshenko’s majority. Respected deputy, you support populism, which will tomorrow result in unpaid wages, pensions, scholarships, and other social support. I emphasize that – it is your responsibility. Because of your silent consent – doctors, teachers, and military men will not get their money. There will be no funds for schools or hospitals. You will be answering for that before Ukrainian people.
I address Verkhovna Rada Speaker Volodymyr Lytvyn. Respected Volodymyr Mykhaylovych, you perfectly understand that current budget is top provocative factor to the crisis in Ukraine. For the sake of state interests I ask you to consolidate the parliament to make alterations to the budget and approve urgent anti-crisis decisions. On behalf of the whole country I demand that the government and the parliament immediately worked out honest budget, where expenses would correspond with capabilities of the economy. This is your constitutional, state and political duty.
I emphasize – all the responsibility for economic situation, for disruption of budgetary process, for destruction of banks system in accordance with the Constitution is upon Prime Minister Yulia Tymoshenko in person. When she reaches deadline, she will not be able to hide in opposition. Enough lies.
I appeal to all fellow countrymen to stay calm. You will be protected. We are able to protect the country and people. The most important thing now is to find political will and courage and to approve a realistic budget for 2009.In order to achieve that I will use all instruments necessary in the state of crisis.
Saturday, January 24, 2009
Gas tricks. The Secretariat of the President of Ukraine issued an analysis of Russia – Ukraine gas agreement.
Just to note some figures for a future reference. Yesterday (23 January 2009) the Secretariat of the President of Ukraine issued an analysis of Russia – Ukraine gas agreement.
Acording to the Secretariat, an average price of Russian gas for Ukraine in 2009 will be $256/tcm (price in the 1st quarter 2009 - $450, actual Ist quarter price with the 20% discount - $360). Average price of Russian gas in 2009 for Slovakia will be $240 (Ist quarter price - $296), for Hungary – 237 ($403), for Poland - $300-310 ($458), for Czech Republic - $340-350 ($420), for Romania - $310-320 ($470), and for Germany - $250-260 ($330-340).
If the “Secretariat prices” are true (I may question the current gas price for Germany, which is told to be $330-340, but is around $450), Ukraine with the base price of $450 in the 1st quarter of 2009 looks like a definite loser.
Acording to the Secretariat, an average price of Russian gas for Ukraine in 2009 will be $256/tcm (price in the 1st quarter 2009 - $450, actual Ist quarter price with the 20% discount - $360). Average price of Russian gas in 2009 for Slovakia will be $240 (Ist quarter price - $296), for Hungary – 237 ($403), for Poland - $300-310 ($458), for Czech Republic - $340-350 ($420), for Romania - $310-320 ($470), and for Germany - $250-260 ($330-340).
If the “Secretariat prices” are true (I may question the current gas price for Germany, which is told to be $330-340, but is around $450), Ukraine with the base price of $450 in the 1st quarter of 2009 looks like a definite loser.
Thursday, January 22, 2009
The Time Bomb. According to the new Russian gas price formula, with the recovery of a world economy, the economy of Ukraine will feel worse.
In the comment to my last post, Leopolis mentioned (very reasonably) that the reliance on a cheap gas has harmed Ukraine’s energy security. It harmed Ukrainian economy as well. Yes, that’s true that Ukraine lost a lot of time, not taking any significant measure to ensure the development of energy saving programmes. As a result, Ukrainian industry is extremely energy consuming, and Ukrainian economy is one of the most energy intensive on the continent. But it is not a fault of Viktor Yushchenko as a President (though he could do something in this field instead of just talking). The problem is that Ukrainian and foreign (mostly Russian) oligarchs who privatised big powerful plants and factories – at a very low price actually – didn’t care at all about any energy saving during all the 17 years of independence of Ukraine. These people, together with Ukrainian politicians, just used low gas prices to earn millions, or even billions of dollars. Business climate is so co-dependent with political situation in Ukraine that it’s really more reasonable for businessmen to have a fast profit today than to invest in an uncertain future.
Anyway, to switch to the market gas prices at the peak of the world economy crisis is also an evil for the country. Ukrainian industry simply doesn’t have time and financial strength for quick modernization and re-equipment. As a result, thousands of workers will lose jobs, provoking the social crisis. It opens a room for some radical or extremist ideas to override the common sense, which is really dangerous.
But the main problem with Russia-Ukraine gas agreement is that it contains a delayed-action bomb – according to the gas price formula, with the recovery of a world economy, Ukrainian economy will feel worse. Everyone noticed that the base gas price for that formula (which nobody have seen) is $450 per tcm. So, de facto Ukraine agreed for the raise of the price of Russian gas almost in three times – in December 2008 Kiev still paid $179.5 per tcm of gas from Russian pipeline.
$450 is really a very high level, taking to the account the geographical closeness of Ukraine to Russia. For example, in the first quarter-2009 Germany will pay $470/tcm, but the cost of transit of gas from Russia-Ukraine border to Germany costs not less than $50/tcm (only Ukrainian transit fee is around $20/tcm). One more example: according to the information of the Secretariat of the President of Ukraine, Hungary will pay for Russian gas only $400/tcm in the first quarter-2009. Romania pays $470, but buys only around 4 bcm of gas every year.
So, if we take these “European averages” together, we will have a base price for Ukraine around $400-420, but not $450.
Ukraine will not suffer a lot from the new gas price in 2009, as it will be presented with 20% discount. Meanwhile, it is still not clear, how much will Kiev pay in average during the year. Gazprom officials made public only the price for the first quarter 2009 – $360/tcm, and mentioned that the average price “may be less than $250”. The Prime Minister of Ukraine Yulia Tymoshenko said that the average figure is $228.8. It’s still $50 more than a price-2008, but Ukraine will definitely survive.
Well, Ukrainian industry will survive in 2009, but not develop. European industry instead will have a unique opportunity to use low gas prices for future growth of its potential. Ukrainian plants and factories will definitely lose their market competitiveness. I have to mention here that – according to the Moscow agreements – the GazpromSbytUkraine Company will control up to 25% of the domestic industry gas market of Ukraine, so, Russians will have a possibility to support loyal and “punish” competitive Ukrainian enterprises.
But the most important changes are expected not in short-term, but in mid-term prospects. What will happen, when the world economy will start recovering from the current crisis? Oil price will grow. As oil price will grow, gas for Ukraine will be more and more expensive. I would like to inform that the gas price of $450 corresponds not with a peak oil price of 2008 - $140/barrel – but with the price of Brent at the level of $111,4, according to the Naftogaz source. So, in 1,5-2 years time Ukraine will unfortunately face its own big economy crisis. …But it’s not an important question for Ukrainian politicians: all the worst is going to happen AFTER the presidential election.
Anyway, to switch to the market gas prices at the peak of the world economy crisis is also an evil for the country. Ukrainian industry simply doesn’t have time and financial strength for quick modernization and re-equipment. As a result, thousands of workers will lose jobs, provoking the social crisis. It opens a room for some radical or extremist ideas to override the common sense, which is really dangerous.
But the main problem with Russia-Ukraine gas agreement is that it contains a delayed-action bomb – according to the gas price formula, with the recovery of a world economy, Ukrainian economy will feel worse. Everyone noticed that the base gas price for that formula (which nobody have seen) is $450 per tcm. So, de facto Ukraine agreed for the raise of the price of Russian gas almost in three times – in December 2008 Kiev still paid $179.5 per tcm of gas from Russian pipeline.
$450 is really a very high level, taking to the account the geographical closeness of Ukraine to Russia. For example, in the first quarter-2009 Germany will pay $470/tcm, but the cost of transit of gas from Russia-Ukraine border to Germany costs not less than $50/tcm (only Ukrainian transit fee is around $20/tcm). One more example: according to the information of the Secretariat of the President of Ukraine, Hungary will pay for Russian gas only $400/tcm in the first quarter-2009. Romania pays $470, but buys only around 4 bcm of gas every year.
So, if we take these “European averages” together, we will have a base price for Ukraine around $400-420, but not $450.
Ukraine will not suffer a lot from the new gas price in 2009, as it will be presented with 20% discount. Meanwhile, it is still not clear, how much will Kiev pay in average during the year. Gazprom officials made public only the price for the first quarter 2009 – $360/tcm, and mentioned that the average price “may be less than $250”. The Prime Minister of Ukraine Yulia Tymoshenko said that the average figure is $228.8. It’s still $50 more than a price-2008, but Ukraine will definitely survive.
Well, Ukrainian industry will survive in 2009, but not develop. European industry instead will have a unique opportunity to use low gas prices for future growth of its potential. Ukrainian plants and factories will definitely lose their market competitiveness. I have to mention here that – according to the Moscow agreements – the GazpromSbytUkraine Company will control up to 25% of the domestic industry gas market of Ukraine, so, Russians will have a possibility to support loyal and “punish” competitive Ukrainian enterprises.
But the most important changes are expected not in short-term, but in mid-term prospects. What will happen, when the world economy will start recovering from the current crisis? Oil price will grow. As oil price will grow, gas for Ukraine will be more and more expensive. I would like to inform that the gas price of $450 corresponds not with a peak oil price of 2008 - $140/barrel – but with the price of Brent at the level of $111,4, according to the Naftogaz source. So, in 1,5-2 years time Ukraine will unfortunately face its own big economy crisis. …But it’s not an important question for Ukrainian politicians: all the worst is going to happen AFTER the presidential election.
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