On 22 November, a European Commission official told New Europe that a Ukrainian deal with Slovakia allowing the former Soviet republic to import gas from its neighbour through reverse west-east flows would not be slowed down by Kiev’s decision a day earlier to unilaterally suspend preparations for an Association Agreement with the EU.
The official noted that “the deal (Memorandum of Understating) for gas reverse flows from Slovakia to Ukraine is supposed to be signed between companies, the operators of the pipelines in Slovakia and Ukraine”.
The agreement, under which Ukraine could eventually import as much as 20 million cubic metres per day from Slovakia, would allow Ukraine to reduce its dependence on Russian natural gas supplies.
Kiev believes it could get such gas for less than it pays to Russian gas monopoly Gazprom, with whom it has been engaged in a long-standing dispute over high prices.
Russia opposes the deal between Ukraine and Slovakia, saying it is illegal because the latter would essentially be reselling gas it had originally obtained from Gazprom.
Ukraine depends on imports of Russian gas, but recently Gazprom complained that Ukraine had fallen behind in payments. Pipelines transiting Ukraine supply many EU member states with Russian gas.
However, Kiev’s decision on 21 November to delay the Association Agreement with the EU doesn’t mean Gazprom would necessarily lower the gas price for Ukraine.
“It remains unclear whether Ukraine’s suspension of negotiations with the EU will be enough to secure it lower gas prices from Russia,” Julian Lee, senior energy analyst at London’s Centre for Global Energy Studies told New Europe on 22 November. “Moscow clearly wants Ukraine its Customs Union and it may require that to happen before it reduces gas prices” he added.
Meanwhile, the Ukrainian government has said it is looking into setting up a joint commission to promote ties between Ukraine, Russia and the EU.
The European Commission has said it is up to Ukraine to decide how to manage its gas transmission system and should Ukraine and other parties be willing to move in the direction of a consortium, including the EU gas industry, “the European Commission is ready to play a facilitating role, provided that the application of EU and international law, including as enshrined in the Energy Community Treaty, is guaranteed”.
Ukraine joined the Energy Community in the beginning of 2011. Membership in the Energy Community means the implementation of common rules for regulating energy markets and an engagement on working towards economically viable, competitive, transparent, sustainable and integrated energy markets that will be able to attract the necessary investments.
The EU has noted that since the March 2009 Joint Conference on the Modernisation of the Ukrainian Gas Transit System, it has been fully engaged with Kiev and the International Financial Institutions (IFI) in an initiative to support the modernisation of the transit system with loans from the IFIs provided that Ukraine carries out a series of reforms.
However, while Ukraine has passed a gas law and joined the Energy Community in February 2011, it has not yet progressed sufficiently in reforms, the European Commission has said. And it now seems Ukraine’s incentive to get closer to the EU has become weaker.
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