MOSCOW (Igor Tomberg, for RIA Novosti) - Ukraine is set to become the first target of a radical change in Russia's gas strategy in the post-Soviet space.
Having realized that subsidizing neighbors by providing gas at cut-rate prices does not bring any political dividends and even leads to sizeable economic losses, Russian gas giant Gazprom has declared its intention to raise prices to European levels for CIS countries as well.
Previously, the switch to world prices was restrained by Russia's integration ambitions, but now the most important thing is solvent demand, determined by the practical absence of any alternative to Russian supplies.
New gas relations began to be built immediately after the Orange Revolution, and largely at the Ukrainian side's initiative acquired a scandalous shade almost immediately. The "disappearance" of 7.8 bln cu m of Russian gas from Ukrainian gas storage facilities reminded Gazprom of the not-too-distant past of unsanctioned gas siphoning.
However, in the new situation Gazprom will not stomach such losses, and hence it applauded the Ukrainian side's proposal settlements for gas transit in cash. The switch to market prices - $160 per 1,000 cu m - came as a shock to Kiev. Alexei Ivchenko, Ukraine's deputy fuel and energy minister and head of Naftogaz Ukraine, had offered $60. Optionally, he is ready to spread payment for these supplies over four years. This, apparently, is a Ukrainian version of the compromise.
In an attempt to find a solution, Gazprom proposed to offset the missing gas against gas transit to Europe. At present, Ukraine receives 23 bln cu m of natural gas a year, while Gazprom's offset reduces this volume to 15.2 bln cu m. Kiev immediately went on the offensive. "If Gazprom proposes this offset, our proposal is to include this gas into payments for gas exports to Europe via Ukraine," Ivchenko said. One lawmaker explained this covert threat thus: "If Gazprom refuses to supply the above-mentioned 7.8 bln cu m of gas, the transit route goes via Ukraine anyway, so we can take as much gas as we need."
It is interesting that Kiev's approach to gas matters has already led to a conflict between Ukraine and Turkmenistan. On June 21, Turkmen President Saparmurat Niyazov demanded that Ukraine switch to cash payments for gas supplies, calling the current practice of commodity settlements an "unheard-of fraud."
In a telephone conversation with Ukrainian President Viktor Yushchenko, Niyazov said: "You are cheating us handsomely, while the money is circulated on your side. We shall not agree to this, neither now nor in future. If you do not have commodities, do not sign commodity agreements."
A Turkmen Foreign Ministry press release pointed out that this mostly referred to the commodity part of settlements for Turkmen natural-gas supplies, for which a special coefficient that considerably overpriced commodities was applied against offsets. As a result, Ashkhabad calculated that settlements for 2004 alone ran short by nearly $600 mln: Ukraine undersupplied $61.7 mln worth of commodities to Turkmenistan. Over five and a half months of 2005, Ukraine's debts for commodity supplies increased to about $500 mln. Kiev could not disprove the Turkmen president's assumptions.
There was, however, another party - the European Union - that was displeased with the fluctuations in Ukrainian energy policy. Russia has assumed a greater portion of responsibility for the continent's energy security, if only for historical reasons. Soviet fuel-export infrastructure, of which Ukraine is a major part, was almost completely oriented towards Europe. At the same time, nearly 80% of gas sales in Europe today depend on Ukraine.
It is no accident that transportation of Russian gas to Europe was a major issue discussed by President Putin during his visit to Kiev in mid-April. Putin's meaningful phrase that "we must be sure that the transit of Russian gas to our Western partners in Europe will work without a hitch," sounded as an obvious warning, not only from Russia, but also - especially considering Putin's meetings with major European leaders shortly before the visit - from Europe interested in uninterrupted gas supplies.
Naturally, Yushchenko, who set Ukrainian accession to the European Union and the World Trade Organization (WTO) as a key vector of the country's development, readily confirmed the inviolability of the policy of "strategic use of unique gas transit possibilities." He declared that he is ready to support any agreement asserting Ukraine's strategic function as a country transporting gas from Russia to Europe.
Regrettably, the new Ukrainian leadership's practices are at variance with its declarations. Obviously, banal gas theft is not in line with the EU rules or the WTO trade standards.
Today's escapades by Ukrainian government officials trying to demonstrate (perhaps only to themselves) Ukraine's energy sovereignty are fraught with a danger of financial losses and a loss of prestige. Moreover, they could seriously worsen relations with Ukraine's major trade and political partners. Ukraine is unlikely to succeed in its "gas war" on three fronts.
Igor Tomberg is a senior researcher at the Russian Academy of Sciences' Institute of World Economic and Political Studies.
