[Ohio UZO News] Ukraine: NYT, FT; State Department; RFE/RL

[Deychak, Orest]

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MEMO FROM MOSCOW

Gas Dispute Runs Deeper Than Pipes, Experts Say 

By ANDREW E. KRAMER; James Kanter contributed reporting from Brussels. 

14 January 2009

Late Edition - Final

MOSCOW -- The feud between Russia and Ukraine over natural gas prices and transit fees has left large swaths of Europe without heat. Yet, what is baffling is that the dispute has always seemed overly technical and easily resolved, if there was the slightest desire on either side. After all, both countries stand to profit from selling fuel to Europe.

The latest agreement collapsed Tuesday, in a familiar cacophony of complaints and countercomplaints, and again over a seemingly trivial issue. With European Union monitors along the pipeline to make sure that Ukraine did not divert any gas for its own use, Russia agreed to resume shipments to Europe.

But rather than repressuring the Ukrainian pipeline system for exports, Russia's gas monopoly, Gazprom <javascript:void(0);> , ordered a single test shipment to see if it would pass through Ukraine to Europe, through a pipeline that was being used to supply the Ukrainian city of Odessa. Ukrainian authorities refused, saying they did not want to cut supplies to their own people, and Russia again halted shipments -- not, some experts believed, reluctantly.

Political experts say that neither side is motivated to settle the dispute, because it has never been about the stated issues. Instead, it has been a proxy for far more fundamental and insoluble matters, particularly Ukraine's 2004 turn to the West in the ''Orange Revolution,'' which deeply shook Russia's nationalists.

''The Russian side is appealing to a lot of technical details to explain why it still wants the conflict to go on,'' Vladimir S. Milov, president of the Institute of Energy Policy in Moscow and a former deputy energy minister of Russia, said in a telephone interview.

''It's very clear to see the desire to pressure the Ukrainian politicians, and pressure them that if they continue to pursue a pro-Western course and not adhere to the rules imposed by Moscow on the post-Soviet space, they will face difficulties,'' he said.

Nationalists in Moscow could swallow the loss of the Baltic states and Russia's former colonies in Central Asia, but they will never accept the notion of Ukrainians, nearly half of whom are ethnic Russians, as members of an independent, Western-oriented state, and potentially in NATO, no less.

Some other analysts point to the aftermath of last summer's Georgian conflict as another sticking point, noting that after the war Russia's president, Dmitri A. Medvedev, had claimed a ''privileged sphere of influence'' over former Soviet states.

''This is a continuation of the Russian-Georgian war, only by other means,'' Grigory N. Perepelitsa, director of the Foreign Policy Research Institute, an arm of the Ukrainian Foreign Ministry, said in a telephone interview. ''There it was tanks, here it is gas.''

This time, though, Europe is suffering as well, with hundreds of thousands of people in southeastern Europe living without heat for six days and factories shutting down in several countries.

Pia Ahrenkilde Hansen, a spokeswoman for the European Commission, said: ''Little or no gas is currently flowing. We are not at this stage jumping to conclusions. But this situation is obviously very serious and needs to improve rapidly. We do need to get to the bottom of this.''

But getting to the bottom of Russia's goals, said Mr. Perepelitsa of the Ukrainian Foreign Ministry, goes well beyond the industrial details of gas transit.

Authorities in Moscow are seeking to discredit the Ukrainian leadership and portray Ukraine as a failed state, he said, while demonstrating to Central European nations that have supported Ukraine's membership in NATO that they can freeze if they continue to do so.

Also in play is a deep personal animosity between Russia's prime minister, Vladimir V. Putin, and Ukraine's president, Viktor A. Yushchenko.

Mr. Yushchenko's face was disfigured in a 2004 poisoning that has never been solved, but for which many in Ukraine reflexively blame Russia. As it did in the disputed enclaves of South Ossetia and Abkhazia before the Georgian war, Moscow has striven to divide Ukraine politically, broadcasting Russian-language television into the country, handing out citizenship to ethnic Russians in Crimea and, critics say, backing pro-Russian figures in Urkraine's political establishment.

Russian officials, meanwhile, say Mr. Yushchenko has stirred up conflict with Russia to detract attention from his dismal performance on the economy during the financial crisis.

On Tuesday, Aleksandr I. Medvedev, Gazprom <javascript:void(0);> 's deputy chief executive, raised a new allegation, saying that Ukraine had been taking orders from Washington after the United States and Ukraine signed a partnership agreement in December that included a clause on energy cooperation.

Mr. Medvedev did not explain why the United States would seek to disrupt relations, not to speak of the gas supply. In a statement, the United States Embassy in Moscow said that the allegation was ''baseless.''

But the ties between Russia and Ukraine, the two most populous successor states of the Soviet Union, are a tangle of alliances and vendettas, mercurial and often inscrutable. Mr. Putin, for example, openly backed Viktor F. Yanukovich, whom Mr. Yushchenko defeated in the 2004 elections after the Orange Revolution protests.

Yet, one of the leaders of those protests, Yulia V. Tymoshenko, has recently seemed to be leaning toward Moscow, refraining for a time from criticizing Russia's war in Georgia.

Indeed, so frustrated were some European Union officials by the latest bad turn in the gas dispute, some began to speculate privately that the two nations might be colluding to seed chaos on energy markets and drive up the price of the fuel that is their mutual business venture.

Bloomberg News reported Tuesday that the cutoff had caused spot prices in Europe to rise to a three-year high of $8.60 per million B.T.U.'s, compared with $5.52 in the United States. With prices expected to fall steeply this year, that could produce at least some welcome pocket change for Gazprom <javascript:void(0);> . 

(This otherwise well-written and perceptive article is marred by the mistaken assertion that nearly half of Ukrainians are ethnic Russians, who, in fact, constitute only 17 percent of Ukraine's population.  I suspect the author may have confused ethnic Russians with Russophones - that is, those for whom Russian is either their native language or language of preference.  OD)

Financial Times 

Europe baffled by broken promises 

January 14

 

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

 

The bitter gas dispute between Russia and Ukraine descended into near-chaos yesterday, leaving European Union diplomats baffled as promises to restart supplies fully were broken and Moscow suggested that the US had meddled in the affair.

 

In a potentially alarming twist last night, Gazprom, the Russian gas company, said it was unable to meet its legal commitments to supply European countries with gas because Ukraine was allegedly blocking the flow across its territory.

 

Russia and Ukraine both defied terms of a contract agreed last weekend with the EU to allow an EU-backed monitoring mission to observe gas transit, leaving people in 18 countries across the continent with supply disruptions.

 

José Manuel Barroso, European Commission president, expressed "disappointment at both the level of gas flowing and our concerns about the access of our monitors", in a telephone conversation with Vladimir Putin, the Russian prime minister.

 

Russia began the day by feeding small volumes of gas into a pipeline across Ukraine to the Balkans, but Ukraine refused to transit the supplies, citing technical reasons.

 

Alexander Medvedev, the deputy chief executive of Gaz-prom, said: "We believed the door for Russian gas was open, but again it has been blocked by the Ukrainians."

 

He accused the US of encouraging Ukrainian action: "It looks like . . . they are dancing to music being orchestrated not in Kiev but outside the country."

 

Oleh Dubyna, president of Naftogaz, Ukraine's state gas company, said it was technically impossible to pump gas to the Balkans via the route proposed by Gazprom without cutting off supplies to eastern Ukraine. "We did not open the valve because there is no capability," said Mr Dubyna. A spokesman at the US embassy in Kiev rejected as "baseless and bizarre" Gazprom's charge that the US had interfered in the dispute.

 

Last night, Mr Medvedev said Gazprom had declared "force majeure" on its gas exports to Europe and warned it would unleash its "entire legal arsenal" against Ukraine.

 

The latest twist in the dispute made a mockery of the EU-mediated agreement, experts said.

 

EU officials said last night the monitors had, after long delays, been given access to control rooms at gas dispatch centres but they would not predict when flows would resume.

 

Jonathan Stern, head of gas research at the Oxford Institute of Energy Studies, said Russian and Ukrainian statements were "all smoke and mirrors".

 

"We should not be listening now to what Medvedev or Naftogaz tell us. We should be listening to the monitors," he said.

 

U.S. State Department 

Daily Press Briefing
Sean McCormack, Spokesman
Washington, DC

January 13, 2009

 

Excerpt on Ukraine

 

QUESTION: The top official of Gazprom accused the United States of being behind Ukraine's behavior during this gas shutoff crisis. He said they are dancing to a tune of elsewhere, essentially. And he might - may have been talking about U.S.-Ukraine relations in general or the agreement that you signed recently with them. What do you think? 

 

MR. MCCORMACK: Bizarre. Look, totally without foundation. This was an agreement that was negotiated on the basis of commercial interests between Russia and Ukraine. I believe that the Czech Republic, in its capacity as the president of the EU, participated and facilitated these discussions. We were an observer from the sidelines on these discussions. I think if you look at our rhetoric, as well as our actions, it was only to encourage a resolution based on commercial terms. And that once you - once an agreement was reached, that it be, you know, transparent that others could see for themselves what the agreement was. But that was it. That was really the extent of it. 

 

Radio Free Europe/Radio Liberty

January 13, 2009 

Old Equipment, Multiple Routes Make Ukraine Gas Transit Difficult To Guarantee 

by Bruce Pannier 

There was good news when Russia's gas giant Gazprom announced on January 13 that it was pumping the first gas in a week into pipelines leading through Ukraine into Europe. 

The bad news came a few hours later when reports emerged that the gas never made it out of Ukraine. 

Russia accused Ukraine of blocking the shipments. But Bohdan Sokolovsky, the energy adviser to Ukrainian President Viktor Yushchenko, said Russia deliberately shipped the gas along a technically complex route that would require Ukraine to cut off its domestic consumers in order to deliver gas to Turkey and the Balkans. 

Yushchenko himself later offered a slightly different explanation, saying Ukraine's multiprong pipeline system makes it impossible to direct gas flows fully in any one specific direction. The Ukrainian leader denied his country had any role in halting gas flows. 

Soviet-Era Pipelines

Charles Esser, the energy analyst at the Brussels-based International Crisis Group, says many sections of Ukraine's pipeline system date back to the Soviet era and make it difficult to control gas flows.

In some places -- because there are Soviet-era pipelines [built at a time] when there was not such a concern about sending it to just this particular customer or that particular customer when it was designed -- there may be a limited ability to do that.

"There is to a certain extent an integration of the pipeline system in Ukraine," Esser says. "I don't know what ability Ukraine has to actually close certain pipelines, so that the gas flows only in certain directions.

"Theoretically, it shouldn't be a problem if they have the proper capabilities, but in some places -- because there are Soviet-era pipelines [built at a time] when there was not such a concern about sending it to just this particular customer or that particular customer when it was designed -- there may be a limited ability to do that," Esser says.

The dispute has also focused on the issue of "technical" gas.

"The Russians have accused the Ukrainians of taking what is called the 'technical' gas out of the pipelines as well, which is the amount of gas needed to sort of get things flowing," Esser explains.

A certain volume of of gas needs to be added to volume daily in order to keep gas moving through Ukraine's pipeline.

It is unclear who is responsible for providing, or paying for, the technical gas. A European Commission official last week suggested that current transit contracts stipulate that the onus is on Ukraine to provide the extra gas.

Ukraine, however, has refused, saying it is Russia's responsibility. 

Who Pays?

Esser says he expects Russia will ultimately opt to supply the technical gas in order to restore the flow to consumers in Europe, but will likely put the cost back on Ukraine in future negotiations. Without the technical gas, Esser says, the pipelines cannot function.

"There has to be a certain amount of gas, which I think is about 18 million cubic meters, that has to be put in of this so-called technical gas in order to get sufficient pressure in the system for the gas to flow," Esser says. "And as far as I know, that is not there."

Another issue is the initial amount Russia made available to the pipeline system early on January 13. Esser said the volumes Gazprom shipped into the Ukrainian pipeline system were roughly 25 percent of the amount needed to fill the pipelines.

"The amount of gas flowing through is smaller than normal," he says. "I've seen figures of only 76 million cubic meters per day, as opposed to the usual 300 million. Flows will probably be somewhat weak and slow."

Russian officials had argued that they would begin with reduced flows until they had received assurances that Ukraine was not tampering with the supplies. But European officials said conditions had been set for the full resumption of gas shipments. 

Assuming Russian, Ukrainian, and European Union negotiators can resolve these latest complications, there are still other concerns that need to be addressed.

"These pipelines are from the Soviet period -- the 1970s, particularly -- so they're over 30 years old," Esser says. "They are in better condition than some of the pipelines in [former] Soviet Central Asia, but still not in perfect condition. Hence, there are some leaks that waste gas."

Esser noted that while Gazprom says it is prepared to resume full supplies to Europe, the process of filling the pipelines, bringing the pressure up, and then getting it to all Gazprom's customers could take a while -- three days before small voumes begin reaching all the areas supplied by Russian gas, and even longer before the situation returns to what it was at the end of last year.

 

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