INTERNATIONAL JOURNAL OF
ISSUE NO. 3 ( 2014/2 )
RUSSIA – UKRAINE RELATIONS AND GAS POLITICS WITH THE EUROPEAN UNION
Till recently, nothing much was heard about gas politics between Russia and Ukraine as both countries were one. After the disintegration of the former Soviet Union, the new order and quest for economic benefits and political importance, especially in Europe, has drawn the two countries into confrontation which has adversely affected their relations. Gas conflict between the two countries, and subsequently, European Union has been occurring, almost on yearly basis. This article traces relations between Ukraine and Russia and analyzes how Russian gas and its transit to Europe has affected relations between the two countries. The work also reviews present effort at restoring smooth gas business between the stakeholders.
Key Words: Russia, Ukraine, European Union, Gas, Relations.
Russia and Ukraine share a lot in common
and their relations could be dated to far period of Kievan
Rus; a predecessor of both Russian and Ukraine
other burning issue was the control of the Black Sea Fleet located in
Areas ans Issues of Conflict in Russia-Ukraine Relation
of the unresolved issues was the energy supply problems as several Soviet – Western Europe oil and gas pipelines run through
Orange Revolution of 2004 was another issue that affected
desire to join the European Union and North Atlantic Treaty Organization (NATO)
was another burning issue in relations between the two countries.
The envoy did not stop at this but further expressed a surprise with Rogozin’s slang words. According to him; “it was for the first time that I heard such a higher official as envoy using this, I even don’t know how to describe, whether it was a slang or language of criminal circles … I can understand Russian language, but, I am sorry, I don’t know what did his words mean”. (Wikipedia).
It could be recalled that relations between
the two countries deteriorated during the 2008 South Ossetia war over the new
rules for the Russian Black Sea Fleet to obtain permission when crossing the
Ukrainian border, which Russia refused to comply with. During that war, the
Russian Prime Minister, Vladimir Putin accused Ukraine of supplying arms to Gesrgia. He claimed
all these disputes, the one that has affected relations between the few former
leading republics of the former Soviet Union is dispute about national gas
prices supplies of Russian natural gas through
could be recalled that shortly after the disintegration of the Soviet Union and
subsequent formation of the Commonwealth of Independent States (CIS) in 1991,
the Ukrainian – Russian relationship was characterized by Ukrainian inability
to pay for up to 50 bcm yearly which it imported from
Russia, leading to very high levels of debts and unpaid bills, which
subsequently led to reduction of Russian gas supplies to Ukraine for short
periods of time, aimed t restoring payment discipline. This in turn led to
unauthorized diversion of the volumes in transit to European countries. In
2004, the Russian government, Gazprom and the Ukrainian government agreed the
arrangements for delivery Central Asian (mostly Turkmen) gas to
The 2005 Gas Crisis
this agreement sealed, it seemed that the required elements for regularizing
Russian – Ukrainian – Turkmen gas trade were in place for the next 5 – 10
years. This was shortly proven wrong as another gas supply crisis erupted
between the two countries in 2005. The dramatic political development in Kiev
in December 2004 saw the election of Yushchenko as
President of Ukraine and the political wronging associated with his election
brought new developments in relation to Ukrainian – Russian gas supplies.
According to Ukrainskaya Pravda (2006), the crisis
started over Turkmen gas supplies. In December 2004, the Turkmen authorities
requested a price increase from Russia and Ukraine from $42/mcm to $60/mcm for
2005. By the end of December, Turkmen gas flows were abruptly halted which
necessitated rapid negotiation, between Ukraine and Turkmenistan allowing flows
to restart to Ukraine on January 3, 2005 at a price of $58/mcm (50:50
cash/barter). (Interfax Oil and Gas Report 2004). In January 2005, the new joint
venture RosUkrEnergo became the shipper of Turkmen
gas, a role which had previously been carried out by Eural
Transgas and earlier Itera.
According to Stern (2006), deliveries to Russia did not resume until May 2005
after negotiations between Turkmen President, Niyazov
and Gazprom Chairman, Miller established that the price of $44/mcm would remain
for 2005 – 2006 but would be 100% cash rather than 50/50 cash/barter. From July
2005, Ukraine also opted to pay a cash price of $44/mcm bringing it into line with
Gazprom. But shortly after, a new problem emerged; Turkmenneftegaz
signed a new contract with Naftogaz Ukraine for 50 –
60 bcm/year for the period 2006 – 26, with the
Ukrainian side to decide on the shipper of the gas. Russia’s Gazprom was
excluded in this new deal. However, in October 2005, Turkmen President, Niyazov insisted that any long term gas arrangements with
Central Asia Energy Monthly (2005) notes that the centre of the conflict was that it was revealed in May 2005 that 7.8 bcm of gas which Gazprom deposited in Ukrainian storage reservoirs during the previous winter had not been made available to the company despite 40 requests sent between October 14, 2004 and March 22, 2005. A version of report on the mystery surrounding the missing deposit suggested that the gas had disappeared (due to technical problems) or had been stolen by unknown persons. Gazprom was unwilling to accept any of the explanations and insisted that the volumes would be subtracted from transit payments to Ukraine which would have meant – given the volumes which had already been delivered in 2005 – that Ukraine would have received virtually no additional gas during the remainder of 2005. (Stern 2006). In reaction to this, according to Interfax Oil and Gas Report (2005), Ukraine said that in the event of such action, gas in transit to Europe would be taken to make up the shortfall. And, because Gazprom could not afford to falter in exporting gas to Europe suggested that Ukraine should pay European export prices, which would have amounted to $600 million. Solution to the face-off was eventually found when both countries agreed to two-stage payments of the volume thus; that 2.55bcm of gas as repayment of Gazprom’s transit liabilities and, 2.25 bcm of gas to be delivered to RosUkrEnergo during 2005 – 2006. (Stern 2006).
arrangement was a far-cry of the required lasting solution to the problem of
prices and transit tariffs between the two countries. Apparently, hoping that
it would be to the advantage of
The January 2006 Crisis
January 1, 2006, tension between Russia and Ukraine was high, with both
countries accusing one another of insincerity. Gazprom accused Ukrainian man
companies of diverting gas from transit pipelines meant for European countries.
Ukrainian companies, on the other hand were accusing Gazprom of pumping insufficient
gas into those pipelines. In any direction the pendulum swung, the European countries
that were expecting gas from
- Gazprom will pay Naftogaz
a tarrif of $1.60/mcm/200km for transit of gas to
will be the company which delivers gas to
and Naftogaz will form a joint venture by February 1,
2006 in order to market gas in
- RosUkrEnergo’s annual gas balance will consist of:-
· 41 bcm of Turkmen gas purchased form Gazexport and RosUkrEnergo;
Up to 7bcm of Uzbek gas purchased from Gazexport with the specific aim of swaps with deliveries to
Up to 8bcm of Kazakh gas purchased from Gazexport with the specific aim of swamps with deliveries
· Up to 17 bcm of Russian gas purchased from Gazprom with a base price of $230/mcm. (RIA Novosti 2006).
The agreement was signed on February 4, 2006 by the three parties: Gazprom (A. B. Miller), Naftogaz (A. G. Ivchenko), RosukrEnergo (O.A.Palchikov and K. A. Chuichenko).
The bulk of the commentary in the European press endorsed Ukrainian President, Yushcheuko’s position that this ways a politically motivated dispute in which the Russian side was attempting to blackmail Ukraine Politically by placing it under extreme economic pressure. (BBC News Website 2006)
The January 2009 Crisis
Russian energy giant, Gazprom suspended gas deliveries to
BBC News Website notes that the cut off of Russian gas to Europe led to difficulties
for a number of countries.
a result of this, discussion was started over alternative source of energy
The Europeans feel that one more obstacle is the position of Turkey, which wants to receive for its own needs 15 per cent of the calculated 30 billion annual volume of gas moved along the pipeline… (Stern 2006). With Turkey having close military ties to NATO and the US, and with her wanting to become a member of the EU, which was denied not long ago, many don’t see any difference between her and Ukraine if a situation is created where Turkey is sitting on gas transit.
Agreement was, however, signed on January 19, 2009 in Moscow between the Prime Ministers of Ukraine and Russia, Yulia Timoshenko and Vladimir Putin and supply of Russian gas to Europe was renewed. Many observers still entertain fears that lasting solution has not been finally found and Bremmer argues that the agreement on gas supplies, that finally emerged will not create a foundation for longer-term improvement in Russia – Ukrainian relations. It won’t be long before Russia and Ukraine are at it again over energy supplies or something else.
The Implications of the Agreement
political implication of the agreement is evident in the rancour
and squabbles between the Ukrianian Prime President,
Viktor Yushchenko and Prime Minister, Yulia Timoshenko, and by extension, strained relationship
with Russia. Having become Prime Minister of Ukraine in December 2007,
Timoshenko has repeatedly insisted on removing the intermediary RosUkrEnergo (RUE), a Swiss – based gas trader owned by
Russian gas giant Gazprom and two Ukrainian businessmen, from the system of gas
supply, something that has now been done. The Prime Minister has accused Amitry Firtash, the businessman
who controls the Ukrainian side of RosUKrEnergo of
Involving in “dirty deals” under the protection of Yushchenko,
his very close friend. She further threatened to name politicians and
bureaucrats who are mired in corruption and who are advocating, according to
her, an escalation of the natural gas conflict with
his own side, President Yushchenko accused Prime
Minister Timoshenko of betraying national interest in agreement she signed with
Putin-Medvedev government in Moscow on
January 19, 2009. Although he was forced to reconcile himself with the
agreement later, he called it a “clear loss” for
to this, both leaders have shared different opinions on fundamental issues
the economic implications of the agreement, questions and doubts have been
raised and expressed on the ability of
To put it succinctly, Volkov says that Ukraine has nothing with which to pay for Russian gas, especially at prices that are close to European levels. According to calculations of the Russian weekly Smart Money, given an approximate price of $250 for 1,000 cubic metres, the Ukrainian yearly spending on natural gas will reach $13.7 billion, which exceeds a third of the revenues of the country’s budget for 2009 ($31 billion). He notes that on the side of Russia, the direct losses for Gazprom due to the halting of natural gas through Ukrainian territory are estimated to be $1.5 billion to $2 billion.
is generally argued that the main motive behind Moscow’s readiness to increase
tension is a desire to achieve maximum profit from export of energy resources,
as well as to use economic levers to guarantee more advantageous geopolitical
positions, and that the increases had arisen without warning. The truth is that
the crisis had, in fact, been brewing for much of 2005 and arguably, for
several years previously.
believes that the only lasting available solution to the gas crisis is to
BBC News Website; January 2, 2006.http://news.bbc.co.uk/1/hi/world/europe/4575726.stm
Central Asia Energy Monthly; April 2005.p.8
Gazprom in Figures, 2004.p.29.www.gazprom.com
Interfax Oil and Gas Report, June 9-15, 2005.pp.8-9.
Jonathan Stern(2006); The Russian-Ukrainian Gas Crisis of January 2006.
RIA Novosti, January 3,2006.
Russia-Ukraine Relations: Wikipedia, the Free Encyclopedia. 27/03/2009.
Trends and Figures in 2004, Cedigaz/IFP:Rueil Malmaison,2005.
Ukrainskaya Pravda; January 5, 2006.http:/www2.pravda.com.ua/ru/news/2006/1/5/36448.htm
Vladimir Volkov (2006), The Russia-Ukrain Gas Conflict.
*Chuka Chukwube - Dr., is a Senior Lecturer in the Department of European Languages, University of Lagos, Nigeria and has been teaching courses in Russian Language and Culture for many years now. His research interest is in the area of language and civilization. He has published extensively in this area of studies. e-mail: firstname.lastname@example.org
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