BBC/Russia’s gas fight with Ukraine

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SHAFAQNA (International Shia News Association) – As the days become colder and the nights shorter, the search for a deal to keep the heating on in Ukraine and safeguard the supplies of many of its neighbours is reaching a critical point.

Russia cut off Ukraine’s gas supplies in June as the conflict between the government in Kiev and pro-Russian rebels in the east escalated. Now there are hopes that both sides can find a compromise.

 

Why did Russia cut off Ukraine’s gas?

Russia moved on 16 June to turn off the taps, after complaining that Ukraine had failed to pay off its debts, estimated at $5.3bn (£3.3bn; 4.2bn euros) by Russian state-run giant Gazprom. Gazprom had sought a repayment of $1.95bn.

It was not the first time: it cut supplies because of price disputes in 2006 and in the winter of 2008-09. But in the tug-of-war between Russia and the EU over the future direction of Ukraine, this row has been harder to resolve.

Why is gas so important?

Ukraine, until the current crisis, relied on Russia for half its gas supplies. Some EU member states such as Slovakia take all their gas from Russia. In total, Russia supplies 23% of the EU’s gas.

Russia’s supply lines run through Ukraine to several EU countries, and as much as 70% of its gas to the EU is carried through those pipes. So while Russia has in recent years tried to bypass Ukraine, in particular with the Nord Stream and South Stream projects, the two countries are, for now, inextricably linked.

Has Moscow tied its gas supply to the crisis in Ukraine?

The supply and price of Russian gas has been part of this crisis from the start.

In December 2013, Ukraine’s then-President Viktor Yanukovych enraged protesters by signing a deal for cut-price gas in Moscow weeks after he ditched an agreement for closer ties to the EU at the last minute.

In April, the government in Moscow then raised the price by 80%: initially it went up from $268.5 per 1,000 cubic metres (pcm) to $385.5 because of unpaid bills, then up to $485, much higher than the market level, ostensibly because of the introduction of an export duty on gas.

Ukraine said the only reason for the price rise was politics, although Gazprom insisted it wanted its bills paid and offered a lower price.

However, there was concern last month when gas supplies to Poland, Slovakia and Germany mysteriously dropped. This was seen by some as a warning signal not to extend EU sanctions on Russia, and also not to sell on to Ukraine some of the gas it was receiving from Russia.

 

Are Europeans at risk of freezing because of the row?

There’s certainly a risk that supplies could be affected. They were, after all, in the pricing rows of 2006 and the winter of 2008-09.

And with winter ahead, urgently sorting out the gas row was seen as a key reason why the EU delayed last month the implementation of a free trade deal with Ukraine until December 2015 at the earliest.

After carrying out a series of “stress tests” on 38 European countries, the EU has warned that any prolonged disruption of Russia’s gas supply could leave private households “out in the cold”. Worst hit would be Finland and Estonia and the non-EU Balkan states of Serbia, Bosnia-Hercegovina and Macedonia.

The Baltics, Slovakia and Hungary are among other EU states that rely heavily on Russian supplies.

But the European Commission says if countries work together rather than adopting “purely national measures” then fewer consumers would be hit.

Although Russia can avoid supplying Ukraine directly, several EU countries have passed on part of their gas supply to Ukraine through a process known as reverse flow.

 

Can Russia avoid sending its gas through Ukraine?

That is what is trying to do. One of its biggest projects is South Stream, which runs through Bulgaria and Hungary, among a number of EU states.

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