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23 September 2017
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The never ending Ukraine story

The one positive thing to come out of the Russian-Ukraine gas crisis, which caused shortages in 20 European countries for more than two weeks amid freezing temperatures, was...

The one positive thing to come out of the Russian-Ukraine gas crisis, which caused shortages in 20 European countries for more than two weeks amid freezing temperatures, was the direct contract signed between Gazprom and Naftogaz and the removal of shadowy Swiss-based intermediary RosUkrEnergo AG. Goodbye and good riddance!

Asked if the mysterious RosUkrEnergo, which was the sole importer of gas to Ukraine from 2006, has now been completely and irreversibly excluded from that role, Ron Smith, chief strategist at Alfa Bank, said, “Yeap, probably so. It does clarify substantially by removing a middleman that by all indications really added nothing to the process except another layer of potential problems. By having direct contract between the actual company purchasing and distributing and the actual company selling that’s much improved,” he told New Europe, telephonically from Moscow.

As the war between Ukrainian President Viktor Yushchenko and former Orange Coalition ally-turned-foe Prime Minister Yulia Tymoshenko is gaining momentum, the latter was more than happy to cut RosUkrEnergo out of the deal and trim a rumored cash source for Yushchenko. “Well, I think there’s a lot going on there than we have any idea about,” Smith said, adding that the Russia-Ukraine contract brokered by Russian Prime Minister Vladimir Putin and Tymoshenko established a direct relationship between the two countries’ companies “instead of going through the shadowy Swiss-made intermediary.”

Yushchenko on February 10 called Tymoshenko a “traitor” for signing what he called a disadvantageous gas import deal with Russia and secretly agreeing to emergency credits from the Kremlin. “This is nothing less than a betrayal of the national interest,” Yushchenko said at a televised Ukrainian National Security Council meeting. Tymoshenko flatly denied Yushchenko’s claims, calling them “groundless” and “invented.” Russia, which canceled an arrest warrant for Tymoshenko in 2005, now enjoys a pragmatic relationship with the Ukrainian premier.

Staying away from politics, Viacheslav Kniazhnytskyi, energy officer at Ukraine’s Mission to the EU, told New Europe that the January contract between Naftogaz and Gazprom setting terms for the fuel’s import into Ukraine, and on-shipment into Europe is ruled by Swedish law and will provide better transparency. “This is not an agreement; this is a contract. That is why this is a substantially different thing of what it used to be in the past. This is a contract, absolutely precise,” the Brussels-based official said, adding that any disagreements would have to be resolved in an international court. “There’re two companies and politicians should refrain from efforts to have any impact on the contracts,” Kniazhnytskyi said, adding that his primary concern is that the gas crisis would not be repeated in the future. “As far as this contract goes, it’s not a political agreement between two governments or between the Russian Federation and Ukraine so I’m cautiously optimistic that we will not have any other crises from now on,” the Ukrainian energy officer said.

Meanwhile, Gazprom and RosUkrEnergo are at odds over the transit of 11 billion cubic metres of gas stored at the Ukrainian underground gas storage facilities. “I think these two guys should fix relations among themselves,” Kniazhnytskyi said. “I’m not sure relations between Gazprom and RosUkrEnergo are very clean.”

Alexander Medvedev, deputy chief executive officer of Gazprom, was quoted by the press as saying that Gazprom has no plans to sell its 50 percent stake in RosUkrEnergo. RosUkrEnergo owes Gazprom about USD 500 million, he said. Ukrainian billionaire Dmitry Firtash owns 45 percent of RosUkrEnergo and his business partner Ivan Fursin the remaining five percent.

Kniazhnytskyi said the problems in the past were the result of these murky deals. “We don’t need at any given time any intermediary. I’m talking with you as a humble Ukrainian customer. I don’t need any intermediary,” he said. “Any intermediary will mean higher tariffs for my family in Kiev.”

The European Weekly

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