[Ohio UZO News] Ukraine: AP; FT; EDM; WP (op-ed); IHT (op-ed); FT (letter)

[Deychak, Orest]

Associated Press

Ukraine says Russia is trying to make it look bad, demanding impossible gas route to Europe 

13 January 2009

KIEV, Ukraine (AP) - A top Ukrainian official says Russia is trying hard to discredit Ukraine by sending natural gas intended for Europe on a technically impossible transit route over Ukraine's vast pipeline system.

Ukrainian energy adviser Bohdan Sokolovsky says Russia has shipped natural gas along a route that would require Ukraine to cut domestic consumers out before it can deliver gas to the Balkans.

Russia's Gazprom <javascript:void(0);>  state-controlled gas monopoly resumed shipments to Europe via Ukraine on Tuesday, but then accused Ukraine of blocking the transit of gas.

Sokolovsky said a gas entry point on the Russian border and a gas pumping station near the Romanian border where Gazprom <javascript:void(0);>  wants its gas delivered are not linked by an export pipeline. That means Ukraine has to cut service to its eastern industrial regions first. 

Financial Times

Russia accuses Ukraine of blocking transit pipes

By Isabel Gorst in Moscow, Joshua Chaffin in Brussels and Roman Olearchyk in Kiev 

Last updated: January 13 2009 

The European Union faced a renewed threat to its energy security on Tuesday after Gazprom accused Ukraine of blocking transit pipelines carrying gas to Europe hours after supplies resumed ending a six day cut off. 

Ukraine responded by saying that Gazprom was disrupting the gas transit network. . 

Alexander Medvedev, the deputy chief executive of Gazprom, said on Tuesday, “We believed yesterday that the door for Russian gas was open, but again it has been blocked by the Ukrainian side,” he said.

Hours earlier, Gazprom announced that gas supplies to Europe via Ukrainian pipelines had resumed after a six day cut off. 

On Tuesday Ukraine accused Gazprom of deliberately destabilising the gas transit system by feeding supplies into a single pipeline bound for the Balkans. 

Bohdan Sokolovsky, energy advisor to Ukraine’s president, Viktor Yushchenko, said, “They have purposely done this to complicate the flow of gas and then blame us. We have asked them to pump the gas into all pipelines to allow for the optimal flow of gas to Europe.

On Monday the EU brokered a deal allowing deployment of an international mission to monitor gas transit lines crossing Ukraine, a breakthrough which was believed to have ended the dispute .

The putative deal – finally signed by Russia and Ukraine on Monday following delays at the weekend – called for the two countries and the EU to dispatch dozens of monitors to pumping stations along supply routes to verify gas shipments

But in a sign of continued tensions, Alexander Medvedev, Gazprom’s deputy chief executive, on Monday warned that Gazprom could sue Ukraine for up to $800m (€594m, £528m) in damages incurred from the dispute and would insist that Ukraine settle any claims by European gas buyers hit by supply disruptions.

“Our lawyers are preparing all defensive measures. Even if such lawsuits theoretically crop up, we will re-address them [to Ukraine],” Mr Medvedev told Eko Moskvy radio station. 

Russia and Ukraine continued to squabble over key points Monday night, including the issue of who should pay for so-called “technical gas” – fuel to keep pumping stations and compressors working in the transit process.

Russian officials said they would cut off supplies if Ukraine, in their words, siphoned gas for this purpose. 

Igor Sechin, Russia’s deputy prime minister, said Ukraine could turn to the EU for help in financing gas purchases, although EU officials took a dim view of the idea. 

Mr Piebalgs said the monitors would help the EU to determine who was at fault if gas shipments failed to arrive. The EU relies on Russia for a quarter of its gas needs, with 80 per cent of that flowing through Ukrainian pipes.

Oksana Reinhardt, an analyst at Deutsche Bank, predicted that European gas buyers hit by the crisis would hesitate to take legal action against Gazprom or Ukraine because it was impossible to establish legally which party was to blame.

Eurasia Daily Monitor

January 13, 2008

Russia’s Gas Disinformation Game

Disinformation operations, as every former KGB operative knows, can be an invaluable tool in winning a war. “Deza,” as it is called by the old boys who once worked on Dzerzhinsky Square in Moscow, is an art meant to be used carefully by professionals; otherwise it can backfire and damage its disseminators.

It was therefore not a surprise that throughout the Russian-Ukrainian “gas war” of January 2009, Russian Prime Minister Vladimir Putin, a former KGB officer, along with key Gazprom officials, many of whom are suspected of having KGB backgrounds, resorted to disinformation on an unprecedented scale. What is surprising, however, is how incompetent their efforts turned out to be.

Disinformation operation one—Ukraine buys Russian gas. Gazprom and Putin have pushed the fiction that Ukraine should pay “European prices” for its purchases of Russian gas. Ukraine, however, buys little if any Russian gas—its main supplier under the January 2006 contract is Turkmenistan with some Kazakh and Uzbek gas thrown in. Russia’s Gazprom buys this gas from the Central Asians for a much lower price than Russian gas sells for, and then resells it to RosUkrEnergo (RUE), a Swiss-based intermediary of which Gazprom owns 50 percent (the other 50 percent is owned by 2 private Ukrainian businessmen). In 2008 RUE resold this gas to a joint RUE-Naftohaz Ukrayina enterprise, UkrGaz-Energo, which was the Ukrainian domestic distributor for Central Asian gas in Ukraine.

The alleged 2009 wellhead price for Turkmen gas is $340 for 1,000 cubic meters (tcm). With transit costs added on, the price for Turkmen gas on the Ukrainian-Russian border was announced to be $380 and not the $450 Putin has demanded that Ukraine pay. According to reliable sources, however, German companies will pay an average of $280 per tcm for Russian gas in 2009. Why such a great price differential?

Disinformation operation two—Ukraine turned off the valves on the pipeline preventing deliveries of Russian gas to EU countries. Gazprom deputy CEO Alexander Medvedev, who is also a member of the coordinating committee of RUE and considered by some to have been a KGB agent in Vienna in the 1980s, told a press conference in London on January 6 that it was Ukraine that had closed down the transit of gas to Europe and that Russia played no role whatsoever in this (Vedomosti, January 6).

The following day Oleh Dubyna, the head of Naftohaz, called Medvedev’s statement “absurd” and pointed out that all the gas cutoff valves were located on the Russian side of the border. Dubyna produced maps of the pipeline system, which clearly proved his assertion (UNIAN press agency January 8).

Then, to make matters worse for Gazprom and Putin’s disinformation operation, the world press reported on January 8 that “Russia said on Thursday it would restore gas supplies to Europe through Ukraine, once international monitors were in place…” (Ukrayinska Pravda, January 8). If Gazprom’s original claim that Ukraine had shut down the flow of gas to Europe were true, how could Russia now be ready to resume shipments of gas that it claimed not to have shut down in the first place? Would Russian troops move into Ukrainian territory, occupy the pipelines in that country, and open the nonexistent valves?

Disinformation operation three—Corrupt Ukrainian politicians are attempting to keep RosUkrEnergo in business. On January 8 Putin told a press conference in Moscow that high-level Ukrainian officials were intent on keeping RUE in business in order to steal profits from the company to fund their forthcoming presidential election campaign; and this, according to Putin, played a role in the gas conflict with Russia (Ukrayinska Pravda, January 8).

Anyone familiar with the history of RUE will recall that it was Putin, along with then-Ukrainian president Leonid Kuchma, who oversaw and approved the creation of RUE at a meeting in Yalta in July 2004. Both men knew the ownership structure of the company and presumably had been briefed on the role, if any, that Russian organized crime played in the company. It is also common knowledge that in January 2006, during the first blockade of Russian gas to Europe, the Russian side (and Putin personally) insisted that RUE become the intermediary in the Central Asian gas trade to Ukraine.

It is also on record that Prime Minister Yulia Tymoshenko has been calling for the ouster of RUE from the Ukrainian gas market since late 2004 and her greatest opponents have been Alexander Medvedev and Vladimir Putin.

Furthermore, at a press conference on January 8, Putin stated, “From our side, 50 percent of RUE belongs to Gazprom, and the Ukrainian side belongs to certain persons we do not know, except that we were shown Mr. Firtash once. I never met with him” (Ukrayinska Pravda, January 8).

How could Gazprom, a Russian state-owned company listed on the London Exchange and closely monitored by Putin and the Russian government, enter into an agreement to create a company, 50 percent of which was owned by persons it claims not to know? Was due diligence conducted by Gazprom to learn more about its mysterious partners? Did Dmitry Medvedev, a lawyer and the chairman of the board of Gazprom at the time, know this? If not, he was negligent in his duties. If, on the other hand, the now-president of Russia knew and remained silent, he, along with Putin, was part of a criminal conspiracy to defraud the Russian people of services and tax revenues into the Russian budget (www.gazpromukrainefacts.com).

—Roman Kupchinsky


The Washington Post

Op-Ed

Short End of the Pipeline 

Anne Applebaum 

13 January 2009

FINAL

A15

 

Like every continent, Europe has its rituals. In the spring, the storks return to the Low Countries from their winter nests in Africa. In the autumn, the French return to Paris from their beaches in the south. And in the winter, the Russians threaten to cut off the natural gas supplies to Ukraine.

Okay, they don't do it every winter. But they did it in the winter of 2005-06 , they did it in 2006-07, and when they once again switched off the taps, on New Year's Day, it was impossible not to feel a wearisome sense of deja vu. This year, as in previous years, the negotiations are almost too complicated to explain, involving not only Gazprom <javascript:void(0);> , the Russian gas behemoth, but also various shady intermediaries, dubious deals and differing price mechanisms. This year, as in previous years, the Russians are claiming that the conflict is purely commercial, not political; that Ukraine is stealing Europe's gas; that Ukraine is not paying a fair price. But this year, unlike in some previous years, those claims are sounding exceptionally hollow.

For one thing, it was the Russian prime minister, Vladimir Putin, not the Gazprom <javascript:void(0);>  CEO, who openly made the decision to switch off the gas. More important, the Ukrainians, who have engaged in plenty of pipeline hanky-panky in the past, have this time around readily agreed to let Europeans and Russians monitor their transit pipelines. They have also paid their (very large) Gazprom <javascript:void(0);>  debt and have asked -- at last -- for a more transparent system of price-setting, one similar to those used in Western Europe (an algorithm that relates the price of gas to the price of oil). Over the weekend they even negotiated a deal with the Russians, belatedly brokered by European Union negotiators. The Russians then refused to sign it for two days before agreeing -- at least in principle -- to turn on the taps late last night (as of this writing, they aren't on yet).

But why the delay? And why cut off the gas supply for so long in the first place? This being Putin's Russia, theories abound. Perhaps the Russians thought the Ukrainians, in the throes of an economic and financial meltdown, weren't going to be able to pay that very large Gazprom <javascript:void(0);>  debt. Perhaps they hoped to discredit the Ukrainian leadership in the eyes of the European Union. Perhaps they wanted the lights to start going out in Bratislava or Brindisi, just to give everyone a scare. Or perhaps, as some believe, Putin was trying to distract Russians from their own pending economic and financial meltdown.

For once, it doesn't really matter. In fact, the most important story is not about Russia and Ukraine but about Europe, and the European Union in particular. Europe, a Hungarian friend said to me last week, "occupies itself with unnecessary things and ignores everything that is important." And there is something to this. There are E.U. sausage-making regulations, E.U. Intercultural Dialogues , even E.U. attempts to broker peace in Gaza. But while most of Europe -- from Italy and France to Bulgaria and Slovakia -- gets at least some of its gas from Russia, there still isn't a true, unified E.U. energy policy, and there isn't a true, unified E.U.-Russia policy, either.

Instead, Gazprom <javascript:void(0);>  -- no longer pretending to be anything but a tool of Russian foreign policy -- still does deals with European gas concerns one country at a time, picking them off one by one. Putin still deploys "divide and rule" tactics to deal with Europe, making special arrangements for Italy, buying politicians in Germany and cutting off the gas to Ukraine. And the tactics work: In 2006, when Western Europeans suddenly felt the pressure drop in their pipelines, they protested, loudly. This year, as kindergartens in Bulgaria briefly went dark, no one in Brussels seemed especially bothered. Knowing that the Russians are unreliable, Russia's European customers now build up their reserves, turn to other sources (the Norwegians have been pumping gas like mad) and keep their fingers crossed, hoping that the Russians and Ukrainians will come to their senses in time.

Instead of sending their best and brightest to create a genuinely secure system -- through expanded use of liquid natural gas, more nuclear plants, clean coal -- most European countries have settled for makeshift arrangements. Instead of using their collective bargaining power, they behave as though they are dependent on Gazprom <javascript:void(0);> , when the reverse is equally true: The Russians need the money they get from European sales, after all, almost as much as the Europeans need their gas. Instead of sending in crisis negotiators every Jan. 1, Europe's leaders could focus on this problem and solve it. I would love to describe this past week's events as a "wake-up call," but there have been so many "wake-up calls" already. When will Europe heed them?

International Herald Tribune

Op-ed

Europe’s Gas Crisis: Don't act surprised 

By Jonathan Elkind and Edward Chow

Wednesday, January 7, 2009 

The West has sleep-walked once again into a Russia-Ukraine gas crisis, with another cutoff of natural gas supply in the middle of winter.

Europeans and Americans alike called the gas war of January 2006 a wake-up call, a needed warning to increase the security of gas supply on the Continent. But three years later, the causes of the chronic gas war remain firmly in place - an utter lack of coherent energy policy in Ukraine, malicious decision-making in Russia, and passive acquiescence by Western countries.

Now it is critical to press Russia and Ukraine for a cease-fire in the gas war - a short-term agreement that allows time for commercial negotiations. Then Kiev - with support from major European capitals and Washington - must finally ensure that future crises are prevented.

In the nearly two decades since the breakup of the Soviet Union, Russia and Ukraine have failed to stabilize their commercial relationship in the gas sector. Both sides bear responsibility, while Europe behaves as if it is an unaffected bystander, despite the fact that 80 percent of its gas imports from Russia transit through Ukraine. Repeatedly, Europe has been willing to take Moscow and Kiev's empty words as assurance that its gas supply is secure.

Russia's Gazprom seeks to dominate Ukraine's gas sector in order to gain effective control over its transit pipelines and storage systems. Ukraine is a vital link for Gazprom to transport 110 billion cubic meters per year to Gazprom's best-paying customers - providing roughly 40 percent of the European Union's gas imports, and more than two-thirds of Gazprom's total revenues.

Russia's leaders apparently intend to exploit their leverage over Ukraine as long as they can. Gazprom executives are lobbying European capitals to explain why they cut the gas supply.

Successive Ukrainian officials have treated the country's energy industry as a political trophy. Sound policy has been subordinated to personal and business-clan interests. The good of Ukraine - and particularly the consumer's need for predictability, transparency and dependability in gas supply from Russia - have never been decisive in Ukrainian energy policy.

Instead, Ukraine has welcomed fictional pricing that does not reflect real costs and shady intermediary companies like the infamous RosUkrEnergo. The result is dirty money for Ukrainian political elites, excessive gas consumption, massive debts due to underpayment, and the underdevelopment of Ukraine's significant gas reserves.

Sadly, the Orange Revolution of 2004 did not yield any improvement in this regard, and Ukraine's Western partners have sat idle. The European Union and its key member states view Ukraine with skepticism on gas issues, even though a stabilized Russian-Ukrainian gas trade would enhance the security of gas supplies for European consumers. And increases in gas transit across Ukraine would be far less expensive than white elephants like the Nord Stream gas pipeline under the Baltic Sea.

Energy policy in Ukraine has been such a black hole that European energy companies and governments, and to a slightly lesser extent the European Commission, have treated Ukraine as Russia's problem to manhandle as it sees fit. Why wade into the swamp? Better to pay the high price of new pipelines to bypass Ukraine.

Meanwhile Washington, entranced by the pro-democracy symbolism of the Orange Revolution, has also shied away from Ukraine's energy problems. Despite clear evidence that President Viktor Yushchenko and other leaders were failing to address the gas issue - which is so central to Ukraine and to the energy security of America's most important economic and trade partners - President Bush met with the Ukrainian president three times in 2008.

Never once did the White House apply real pressure on Ukraine to end the excuses and introduce real energy reform. Instead the Bush team allowed itself to be distracted by the longer-term goal of Ukraine's entry into NATO.

If Ukraine is to become part of the Euro-Atlantic community, which we would welcome, the arena in which the country can contribute most concretely to European stability, security and harmony is energy security. The matter is also existential for an independent Ukraine.

Kiev can push ahead with gas sector reform - transparent supply and transit relations, international-standard gas contracts, real prices and higher energy efficiency, promotion of domestic production, and restructuring of its bankrupt state energy company Naftohaz. And if it pursues this path, it should seek and receive urgent, intensive and coordinated support from Western friends.

Or Ukraine can wring its hands and let the current situation continue with short-term fixes that only weaken its position with Russia. If the country chooses the latter course, no one in Kiev - or in Berlin, Paris, Brussels, or Washington - should act surprised that gas crises and energy insecurity become a recurring nightmare for Europe.

Jonathan Elkind is a senior fellow with the Brookings Institution in Washington and served previously on the staff of the U.S. National Security Council. Edward Chow is a senior fellow at the Center for Strategic and International Studies in Washington and a former international oil industry executive.

Financial Times

Gazprom may be liable for causing harm

Published: January 12 2009 

From Mr Ethan S. Burger.

Sir, Article 15(4) of the Russian Constitution provides that “Commonly recognized principles and norms of international law and the international treaties of the Russian Federation shall be a component part of its legal system”.

When Gazprom uses natural gas as a political instrument against European Union members and other states as a means to influence the outcome of its dispute with Ukraine, even though it may be acting at the behest of the Russian government, it runs the risk of running afoul of commonly accepted principles of private international law as well as applicable competition or anti-monopoly legislation.

The Russian state exercises effective control over Gazprom. Thus, depending on the text of the relevant energy gas supply contracts, Gazprom may be found liable for causing harm to its customers and also be subject to sanctions established by its customers' governments. Arbitrator(s) or foreign judge(s) as well as foreign governments may determine that Gazprom is required to pay direct and/or consequential damages to its customers, as well as fines or other sanctions to the relevant governmental body(ies).

Potential plaintiff(s)/foreign governments are almost certainly aware that Gazprom has significant assets located outside of Russia to pursue. Gazprom’s management and the Russian government seem oblivious to this scenario.

Ethan S. Burger,
Adjunct Professor,
Georgetown University Law Center, Washington, DC, US

 

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