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Where there is no law, but every man does what is right in his own eyes, there is the least of real liberty
Henry M. Robert

The price of the cheap gas

Rules of play for Ukraine
13 October, 2011 - 00:00

Less than a week is left before October 18 when the Ukrainian and Russian presidents will arrive in Donetsk for the Ukrainian-Russian forum. According to the head of Donetsk oblast state administration Andrii Shyshatsky, the preparation for the meeting of the two countries’ businesses, and, of course, the meeting of Viktor Yanukovych and Dmitry Medvedev is the “main event.” The exhibit of the Interregional Cooperation and the Fourth International Investment Summit DID 2011 – “Interregional and Transfrontier Cooperation” will also take place during the forum. All these events will gather about a thousand participants but everybody’s attention will be first of all compelled by the presidents’ meeting. It will depend on them whether Donetsk will become a place where Ukraine and Russia will finally compromise on gas problems (it took a vague shape during the previous round of talks in Zavidovo) or the world “deadlock” will characterize further relations between Ukraine and Russia.

Just like before any talks the parties tried to clear the ground and convince the public of the two countries that their positions are logical and reasonable. However, their approaches turned to be absolutely different. The evidence of this is the fact that the parties refused holding the Ukrainian-Russian intergovernmental commission in Donetsk. Probably, they have not made any decisions yet. Yanukovych emphasized on keeping the parity and spirit of cooperation between the countries but Russia mainly flexed its muscles... “The situation that has made gas relations uncomfortable is the issue we have already worked on and will have to work on again in order to resolve this situation correctly. We cannot blame anybody or label anybody saying who is better and who is worse. We enjoy the equal rights in our relations and we have to preserve this parity.” Nevertheless, the Ukrainian president did not predict smooth talks: “When the national interests are concerned we will, of course, protect them.”

The Russian president did not make any announcements before his visit to Donetsk. However, Russian Prime Minister Vladimir Putin who is an unofficial candidate for presidency declared himself to be the main decision-making center. During the plenary session of the third investment forum “VTB Capital. Russia Calling!” he decided to play hardball on Ukraine. Probably, when speculating about the compensation Ukraine will obtain if it transfers its gas-transport system to Russia or if Naftohaz of Ukraine merges with Gazprom he said to UNIAN: “They will get the access to the gas-transport system but not to the export routes since only Gazprom exports the gas. They will get access to gas production and the gas-transport system within the country.”

Certainly, Putin did not lay down all of his cards before the talks. As usual, the vice-speaker of the Russian Parliament, president of the Russian Gas Society Valerii Yaziev did it for him. “Everything will be fine with Ukraine because Ukraine has no way out. It will buy as much gas as needed and pay everything it has to,” he said and added “we have no reasons to decrease the price.” According to Yaziev, in order to have a positive decision of this question Ukraine must enter the Customs Union and the common free market zone and Naftohaz must merge with Gazprom. “After that the gas will be cheaper for customers for sure,” he promised.

Ukraine has already heard these promises and is not ready to exchange them for its gas-transport system. Now it is time to give the floor to Europe. German political expert Alexander Rahr said when commenting on numerous inspections of Gazprom offices in Europe to Gorshenin Institute: “Now it is easy to understand to what extent Ukraine sees itself integrated into the new energy market of the European Union. If Ukraine completely obeys the rules of play it has to completely decentralize its own gas business. It means dividing Naftohaz and allowing the Western investors taking a part of this business on the Ukrainian territory. However, according to him, despite the declarations there is no real result of the European integration of Ukraine in this area. “The question is: when will it happen if it happens at all,” Rahr thinks. “Only when Ukraine speaks in unison with EU it will be helped by EU and will become a part of the European hierarchy. It is not happening so far. Probably, it is the goal of Ukraine but I am not sure that is the goal of the Ukrainian politicians. Ukraine is rather willing to come to an arrangement with Russia, too, and open the opportunities of the Russian markets very attractive for Ukraine.” According to the expert, “there are a lot of pitfalls in the gas relations between Russia and Ukraine and many of them are absolutely unknown to outsiders. Speaking about the gas price is one thing but we all know that the gas business is related to other structures on the Ukrainian territory with hidden Russian schemes involved.”

By Vitalii KNIAZHANSKY, The Day
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