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Russia, Ukraine play gas wars over prices, fines

Expert views ‘Nord Stream 2 as purely political project aimed at destruction of Ukrainian gas transit and delivering additional blow to our economy’

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The long-standing gas conflict between Kiev and Moscow continued on January 22 with the head of Ukraine’s competition authority saying the regulator had decided to fine Russian gas giant Gazprom 85 billion hryvnias ($3.5 billion) for abusing its monopoly on the Ukrainian gas transit market. “A decision has been taken in relation to the abuse of the monopoly on the transit market … by Gazprom as a monopoly buyer. The amount of the fine is 85 billion hryvnia,” Yury Terentyev wrote on his Facebook page.

Gazprom this week said Ukraine owes the company $2.549 billion for gas supplied in the third quarter of last year and that the money should be paid within 10 days. Gazprom says that according to the “take-or-pay” terms of the contract, Kiev has to buy a minimum quantity of gas annually or face a penalty. Ukraine’s state-owned Naftogaz responded by calling the clause “unlawful and void”.

Gazprom’s claim followed Naftogaz’s decision to impose a 50%-plus increase in transit fees for exporting Russian gas across its territory to Europe.

“Ukraine decided to raise the transit fee for Russian gas transit via Ukraine to the normal international level and Russia responded with the charge, but notice, that previously we agreed with Kremlin the amendment to gas contract which basically cancelled take-or-pay method,” Igor Mantsurov, director of the Scientific Research Institute of Economics at Ukraine’s Ministry of Economic Development and Trade, told New Europe on January 21.

Meanwhile, Ukraine has filed an application for an increased gas supply from Slovakia in the amount of 37.04 million cubic metres for January 20. In addition, Ukraine may resume natural gas purchases in Russia in the wake of approaching frosts, Naftogaz CEO Andrey Kobolev said on January 19. Mantsurov added “winter seems much colder than we expected and, as a possible variant, we cannot absolutely exclude the option of negotiations with Russia on additional purchases of Russian gas”.

The EU receives about 40% of its Russian gas imports via Ukraine. Gazprom wants to build Nord Stream 2 to reduce its transit via Ukraine. The Nord Stream consortium has plans to double Nord Stream’s capacity with the construction of a third and fourth pipeline but some EU governments and Ukraine have spoken out against the plan. “We seriously view Nord Stream 2 as purely political project aimed at destruction of Ukrainian gas transit and delivering additional blow to our economy,” Mantsurov told New Europe.

Russia raised its gas exports to Germany via Nord Stream by 10% in 2015, its operator said on January 22. But at 39.1 billion cubic metres volumes remained well below Nord Stream’s capacity of 55 billion cubic metres. Gazprom owns a 51% stake in the Nord Stream consortium. Germany’s E.ON and BASF SE/Wintershall Holding each own 15.5%, while Dutch firm Gasunie and France’s Engie control 9% each. “We probably we need to define what type on interdependence we want with Russia,” an expert from France’s Foreign Ministry told New Europe. “In a way, we need energy security and, on the other hand, we don’t need to depend too much on Russia but Russia is very dependent of Europe as a customer so it’s also a very complex issue.”

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Co-founder / Director of Energy & Climate Policy and Security at NE Global Media

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