NOMOS: Energy and policy contexts

Express–analysis of the current situation in Ukraine and around it

No. 3, 5 December 2013

Daily Russian-Ukrainian contacts at the level of deputy prime ministers indicate the hyperactivity of the Russian side to consolidate the success of the Kremlin special operation-2 “Breakdown of the EU – Ukraine AA”[1].

In the second issue of our newsletter we have predicted probability of discussions on the transfer of energy assets to Russia. On December 4^th this question was putted on the agenda during the visit of Deputy Prime Minister Y. Boyko to Moscow. However, Russia's conditions of total gas (and not only!) capitulation of Ukraine are not suitable for Ukrainian side (about conditions that could be set forth in Moscow, we wrote in issue number 1 dated December 3^rd). Therefore it is no coincidence that Gazprom announced that the debt problem of Naftogaz is not yet solved to the end, although the day before it was presented in Kyiv as resolved.

NOTA BENE: A. Miller: «Currently the debt of SJSC Naftogaz of Ukraine for gas supplies in August, October and November is $ 2,02 bln, we are looking for variants to solve this problem, hold negotiations, but agreement is not currently achieved so far».

The gas price issue is also not solved as yet. Proposed by Gazprom approach to “increase volumes of purchase in exchange on price reduction” will not bring relief to the financial situation of Naftogaz, but vice versa. A simple calculation shows that purchase of 50 bcm of gas for $280/1000 cubic meter will count for Naftogaz $14 bln. a year, which is more on $3,2 bln. as purchase of 27 bcm under current price of $400 this year. The necessity to pay more in terms of continuous industrial market redistribution in favour of private gas dealers will lead only to worsening of Naftogaz financial situation, burden besides this with the $2 bln. debt from 2013.

The strategy of gradual but steady stalemating of Naftogaz into the growing financial problems is in the interest of Gazprom, which expects to get GTS against discharge of the debts and of parasitical Ukrainian gas oligarches, which are seeking to privatize the company's mining assets.

Ukraine’s acceptance of the approach “increase volumes of purchase in exchange on price reduction” will bring the economy back to the scenario «inflation of a gas bubble». It will eliminate all government’s efforts of the last years to bring down gas intensity, make unnecessary measures on gas substitution and challenge development of projects on domestic gas production. Annual volumes of gas utilization will go upon 70 bcm (to compare in 2012 it was 54,7 bcm), with will turn the country for a decade back. It will make also unnecessary Chinese projects on coal gasification.

The meeting of Y.Boyko and CEO of Gazprom A.Miller has ended without solutions in view of the latest very short message: «During a meeting actual question of cooperation in the gas sphere were discussed». At the same time Gazprom putted on the website a message to Ukrainian pipeline barons: «South corridor and the Power of Siberia will be supplied with Russian pipelines». Thus, Russia continues to take steps aimed at reducing the traditional imports of pipeline products from Ukraine and thereby further attempts to persuade the regime of Mezhyhirya to surrender to Russian conditions – namely, the announcement of the intention of joining the CU as a very precondition.  

Russia is also waiting on results of Yanukovych visit to China. According to existing information, Russians have asked Chinese authorities to refrain from helping Ukraine in exchange for the promise of Russia’s more flexible position regarding gas price for China. On its hand, China will also not hurry up with credits for Kyiv, trying to chaffer maximal possible rebates on rent of 3 mln hectares of agricultural lands and in some other issues. Also it stands out a mile that China is implementing a separate policy towards the region of Central and Eastern Europe, supporting their integration into the EU, but not in case of Ukraine.

 NOTA BENE:  Premier of the State Council Li Keqiang: "The countries of Central and Eastern Europe are important members of the big European family. China fully supports the European integration ... China supports the choice of the Central and Eastern European countries to join the EU. We believe that full cooperation between China and the countries of central and Eastern Europe not only benefit our peoples, but also give new impetus to a healthy, balanced and sustainable development of relations between China and the united Europe".(Agency "Xinhua", 26.11.2013)

China does not include Ukraine into Central and Eastern Europe, and sees it as a zone of the Russian influence – of part CIS. Thus, the Yanukovych regime increasingly enters the losing position in relations with all partners, which he called strategic. Moscow intends to use it in fully. Special operation-2 is smoothly developing into the special operation-3 «Anschluss». Its providers stand out to be Shuvalov–Rogozin–Miller from the Russian side and Medvedchuk–Klyuev–Boyko from the Ukrainian side. For success of the special operation propagandist construct was fabricated through the Russian (and not only) media as a conspiracy of the West against Yanukovych.

NOTA BENE: In the hour and a half Sunday edition of the Russian news with Dmitry Kiselev, viewers were informed that "the main driving force of European integration of Ukraine - Sweden , Lithuania and Poland , this old coalition , which was denounced yet by tsar Peter, tries to harm Russia and revenge , the more that in the family of the Swedish foreign Minister Carl Bildt were the generals". At the summit in Vilnius "Europe with the U.S. tried to take away from Russia its old ally" but it was for nothing, they say, - "primarily due to the fact that Russian President Vladimir Putin , as in the Syrian issue , managed to take care of Russia and turn the situation in its favor".

According to some information, the transfer of all major industrial assets in the defense industry and energy will have been approved finally by the end of this week (!) with signing of the agreement in the coming days. For this, the Government of the Russian Federation promises Ukraine to provide credit resources of up to $30 billion (conditions are not disclosed) and additional $5 billion as a special "bonus" (precisely the rollback). Thus, in the case of the described scenario, a version about the transnational corrupt deal for purchasing the decisions of Yanukovych's towards a failure of signing the AA with the EU and Ukraine 's future involvement of the CU and the CSTO turns to be true.

P.S. The lack of strong counteractions from the EU against Russia regarding Ukraine encourages Moscow to act harsher in gas relations with the EU. Russia announced the preparation of a claim to WTO regarding the Third energy package which it considers discriminatory. Also, the fact that the issue of discriminatory behavior towards Ukraine was not included into the agenda of the NATO - Russia Council meeting is further encouraging Moscow to implement the "Anshluss” scenario.

On this background, the recent decision of Brussels looks quite comical: "The European Commission authorizes the proposed acquisition of the common control over WiNZ and Wintershall Services of Netherlands by Russian energy company "Gazprom" with an individual control over Wingas and WIEH of Germany.... The Commission concluded that the proposed transaction is safe with respect to the competition norms."