Naftogaz stops Russia creating ‘Transnistrian scenario’ in Ukraine

Having launched a new gas scandal directly connected with the supply of Russian gas to the Donbas, Russia’s Gazprom now looks to have outsmarted even itself.

Russia has once again raised the prospect of another gas conflict with Ukraine. Gazprom stated that Naftogaz had not made in time an advance payment for the supply of Russian gas, and had increased the request, and in turn Gazprom threatened to suspend supplies. And at the same time the Russian gas monopoly warned the European Union that the transit of gas is allegedly in jeopardy again, while the company intends to abandon the Ukrainian transit corridor - the Board of Directors of Gazprom JSC has already approved ongoing activities to diversify export routes. Gazprom has once again tried to convince Europe that its proposed project “Turkish Stream”, which is considered a failure in the EU, can totally replace the Ukrainian pipelines.

The only thing that Gazprom avoids making clear is that the company itself is the breaker of the “gas peace.” The fact that on February 19 Naftogaz made an advance payment for 454 million cubic meters of gas – the prepaid balance amounted to 287 million cubic meters of gas as of the beginning of February 23, and the request for February 22 and 23 increased from the usual for the last period 30 million cubic meters to 114 million, which is allowed under a so-called “winter” contract.

But Gazprom rejected the request, actually supplying only 47 and 39 million cubic meters, respectively. In addition, Naftogaz has filed a prepaid request for gas supplies to Ukraine via gas metering stations (GMS) Sudzha, Pysarivka, Sokhranovka, Valuiki, Kobrin and Mozyr. Gazprom’s chairman of the board Alexei Miller said that on February 19 at 16:00 (Moscow time), Gazprom started gas supplies to Ukraine, including through GMS Prokhorovka and GMS Platovo in daily amounts of 12 million cubic meters. This is done in order to supposedly provide the Donbas with fuel that Naftogaz has ceased to supply, which is  simply not true. Deliveries by Naftogaz to the so-called Donetsk People’s Republic (DNR) and the Luhansk People’s Republic (LNR) were stopped at the early hours of February, 19. But in the same day’s evening Naftogaz resumed them. The company explained that the suspension was caused by damage to the pipeline and militants not providing an opportunity for repair workers to get to the scene of the accident.

“Today, the situation was the most difficult, as over the past few 5-6 hours our services could not get close to the pipelines, which could have resumed supplies to the ATO [anti-terrorist operation] area in full. Now there is such possibility, [and] now supplies have been restored,” said Andriy Kobolev, chairman of the board of Naftogaz.

Another important point is that there are no representatives of Naftogaz and Ukrtransgaz ath GMS Prokhorovka and GMS Platovo, via which Gazprom supplies gas to the militants. So, there is no one to monitor such supplies, since this territory temporarily remains beyond government’s control. That is, the supplies are made in breach of contract – not on the route declared by the buyer.

Naftogaz has already informed the European Commission and the Energy Community Secretariat about the Gazprom’s initiative and about the violation of the Brussels tripartite protocol as part of the rapid response procedure.

*** After long talks on the evening of October 30, Ukraine, Russia and the European Commission signed the Brussels Treaty – [a set of] documents providing for the resumption of Russian gas supplies to Ukraine and ensuring uninterrupted transit to Europe in winter. In particular, Ukraine, Russia and the European Commission signed a legally binding tripartite protocol, [thus] fixing an agreement on supplies of Russian gas to Ukraine during the 2014-2015 winter season. The document was sealed with the signatures of the energy ministers of Ukraine and Russia Yuri Prodan and Alexander Novak, as well as vice president of the European Commission responsible for energy issues at that time, Günther Oettinger. In addition, Naftogaz and Gazprom signed an addendum to the contract, fixing the conditions for supplies of Russian gas in the period up to the end of March. The document was signed by the head of Naftogaz Andriy Kobolev and the head of Gazprom Alexei Miller. The main condition is that the price of gas for Ukraine remains at $385 per thousand cubic meters of gas until the end of March, or [the price will be] lower, due to the drop in oil prices. As for new gas supplies, they shall be made on a prepayment basis, with the price calculated according to the formula in the existing contract, taking into account the abolition of export duty by the Russian party. "Ukraine may request as much gas as necessary, bypassing the “take or pay” principle as provided for in the current contract,” the European Commission noted at that time.

Naftogaz has also warned Gazprom, which over the last few days has been limiting gas supplies to Ukraine, of the impossibility of its making further advance payments for natural gas without guarantees by the Russian monopolist to adhere to the Brussels Protocol.

“Naftogaz Ukrainy does not consider it possible to make additional advance payments for the supplies of Russian gas until it is reasonably reassured in Gazprom’s strict adherence to the contract and also the fulfillment of the Brussels tripartite protocol signed by the representatives of Russia, Ukraine and the European Union,” Naftogaz reported in its message.

Naftogaz officials add that “Today, Europe remains the main source of imported gas for Ukraine. Therefore, the flawless fulfillment of our obligations to transport gas to the EU is our continuing strategy."

The European Commission has already reacted to the situation. Anna-Kaisa Itkonen, a speaker of the Vice-President of the EC on energy issues Maroš Šefčovič said that the illegal supply of gas to the DNR and LNR is a serious accusation, so this is now being checked.

Thus, Gazprom has yet again confirmed its reputation as a scandalous provocateur of anxiety. And this is how Europe sees it, being pretty fed up with Russia’s games, so it is going to reconsider its relations with the Russian gas monopoly in the near future in this regard.

Naftogaz is ahead of the curve

Experts believe that the public “exchange of courtesies” between Gazprom and Naftogaz is linked with the temporary suspension of Naftogaz deliveries to the uncontrolled territories of Ukraine’s east, which happened due to hostilities, and was eliminated as quickly as possible. Nevertheless, the incident caused an instant reaction from Russia, which demonstrated its readiness for such a course of events – the plan of actions has been set up beforehand, which Russia immediately used.

“There was a whole series of public actions - orders by [Russia’s] Prime Minister Medvedev, the start of gas supplies to the DNR and the LNR via entry [stations] that have not been involved up to this point. But a technical agreement stipulated the unconditional right of the buyer to determine through which entry [stations] and to which extent the gas should be supplied. Gazprom’s unilateral actions also caused a rapid reaction by Naftogaz. From my perspective, the game aims to force Naftogaz to stumble in their ability to pay for gas and, accordingly, to let Gazprom enter the format of the termination of deliveries. Gazprom tried to check the ability of Naftogaz to act in accordance with the Additional Agreement №33 (the Winter Agreement - UNIAN), and received confirmation – Naftogaz  will not leave the situation without attention,” said the president of the Kyiv Institute for Energy Studies, Alexander Narbut.

Meanwhile, there is big question - why has Naftogaz ordered 114 million cubic meters of gas, whereas the earlier volumes were at the level of 30 million?

Narbut believes that Naftogaz intendeds to get the remaining prepaid amount, so as not to give Gazprom the ability to include those supplies in the volume that have been supplied to the DNR and the LNR. “In addition, using the current period of warm weather, Naftogaz has tried to get a focus on this situation and bring it to the next level of a tripartite negotiation process, where it can defend a more acceptable formula for calculating the gas price, that is, to switch to LC payments [payments by letter of credit], which is more favorable for Naftogaz. And, perhaps, there will be an additional opportunity to actualize the attention of European partners in terms of economic aid, which Ukraine now needs,” said Narbut.

But this step by Naftogaz carries a risk, because the gas reserves in storage are very low - now at the level of eight billion cubic meters, and that "on paper", and of this 5.2 billion cubic meter is impossible to pump for technical reasons. But in a situation where Gazprom can manipulate the gas supply to the DNR and the LNR, Naftogaz has decided to play ahead of the curve.

Experts believe that nothing extraordinarily bad will happen. Director of energy programs of the Center of World Economy and International Relations of Ukraine’s National Academy of Sciences Valentyn Zemlyansky believes that the volumes over which the two companies are fighting are not too important and can’t significantly affect the situation. “This is purely political speculation - there is no economics here. The political speculation is that Gazprom will supply gas to the Donbas independently, but because it’s a Ukrainian territory, it is going to include the cost of these supplies into the overall cost [for Ukraine]. Meanwhile, Naftogaz said that it, itself has resumed deliveries to the country’s east and does not need any of [Gazprom’s] help. But even if Gazprom stopped the supplies, then still there is nothing bad in it - there is gas in storage, [and] we get a reverse flow gas from Europe. We can still fly “on one wing” through this winter season, if it doesn’t go down to minus 20 degrees in the near future,” Zemlyansky said in comments on the situation.

With regard to the Gazprom’s gas supply to the Donbas, which caused all this fuss, this is Russia’s attempt to set up a “Transnistrian scenario” in Ukraine, according to Narbut.

"They would like to repeat the “Transnistrian scenario.” They would present the bill for supplies to Moldova, but the end consumers are Transdniestrian enterprises. That is, the same model they want to implement here,” said the expert.

The currently unrecognized republic of Transnistria, supported by the Russian Federation, receives Russian natural gas through the Russian-Moldovan joint venture - JSC Moldovagaz, which acts as the sole operator of gas supplies to Moldova. Since 2006, Tiraspol has not paid a dime for Russian gas - all the bills go to Chisinau (which unrecognized Tiraspol refuses to obey), where they are unable to pay. Formally, therefore, the duty of Moldova to Russia is being accumulated (of course, official Chisinau does not recognize this debt). Since Transnistria consumes 1.8 billion cubic meters of gas out of the volume of 2.82 billion cubic meters supplied to Moldova, the debt of the Transnistrian Republic already exceeds $ 5 billion, according to experts’ estimates. Moldova has repeatedly attempted to address this question with Gazprom, but to no avail. Experts believe that the problem of the recovery of this debt gas could be used by Russia as a lever of pressure on the authorities in Chisinau in order to force them to renounce European foreign policy vector.

According to Narbut, Naftogaz has managed to prove with its position in the current gas scandal that Gazprom is not fulfilling its obligations – there are supplies through the entry stations other than provided by the technical agreement, and there are shortages in deliveries. “So, that is enough … to make it clear to our European partners that Gazprom does not even adhere to commercial agreements that have been reached on a tripartite basis,” Narbut said.

Nana Chornaya (UNIAN)

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