Russia takes a hit in EU energy crisis: analysts

12th January 2009, Comments 1 comment

The Russia-Ukraine spat has spurred Europe’s need to reduce dependence on Russian gas supplies and seek for alternate pipelines.

MOSCOW – Russia's standing has taken a battering in the crisis over European gas supplies, undermining its position as chief energy supplier to the EU and spelling some loss of diplomatic muscle, observers say.

As Russia and Ukraine groped towards a deal to restore supplies to Europe and Prime Minister Vladimir Putin warned Kiev against "stealing" Russian gas, analysts and newspapers here were underwhelmed by the Moscow's performance.

"Strategically I think Russia lost," said foreign policy expert Fyodor Lukyanov, editor of the journal Russia in Global Affairs.

"Regardless of who is to blame, the general impression in Europe is that the eastern dimension of gas supply is not secure."

"The crisis united Europe," ran a headline in the Russian newspaper Kommersant on Sunday. "The EU will undoubtedly try to find ways of reducing dependence on Russian gas supplies and avoiding such crises in future."

Some experts believe the latest New Year gas dispute to hit Moscow's supplies to the EU should spur investment in new routes from Russia that skirt around troublesome ex-Soviet neighbours, notably a plan for a "Nord Stream" pipeline under the Baltic Sea that has the backing of EU heavyweight Germany.

"Germany will from now on be able to convince other Europeans of the importance of this project," said Nikolai Petrov, an analyst at the Carnegie Moscow Centre.

But while Russia, the source of a quarter of EU gas supplies, is likely to remain the bloc's dominant supplier, others say the crisis puts a question mark over Russian supplies and will spur the EU to pursue alternatives such as gas from North Africa and Central Asia and increased use of nuclear power.

Those who believe Russia has lost the initiative in its efforts to dominate European gas supply point out that energy giant Gazprom has had to scale back its ambitions as its financial position has deteriorated with falling world energy prices and a worsening credit market.

"Gazprom and all Russian companies are suffering from the (financial) crisis. It's not the same Gazprom it was a year ago. It's had to cut down many of its ambitious projects," said analyst Yevgeny Volk, of the Washington-based Heritage Foundation.

He added that Gazprom would in fact be more reluctant than it is admitting to open up the corruption-ridden gas trade with Ukraine to outside inspection, as foreseen under an EU-brokered resolution.

"Just as in Georgia, it certainly means Russia has to make concessions, to agree with a certain international machinery and agenda.... Russia will have to open up many things that Gazprom and the Russian energy industry are not eager to open," said Volk.

For his part Lukyanov believes the crisis has shown up the inability of Russian gas giant Gazprom to deal with Ukraine alone and could herald an advance by more capable European energy companies into Russia's energy market.

"Both sides understood that the illusion Gazprom can do everything itself is impossible - Ukraine showed it's a monopoly too, a transit monopoly, and Gazprom can't do anything against it," said Lukyanov.

On the diplomatic front, the use of EU monitors to solve another crisis on Russia's borders - the same solution that ended last year's war in Georgia - confirms that Moscow has conceded the lead role in adjudicating disputes in its neighbourhood, he added.

While Ukraine is even further from its goal of EU membership due to the current dispute, the EU is increasingly playing the role of "patron" in solving the problems of eastern neighbours, ranging from the current gas dispute to efforts to police the crime-ridden Ukrainian border with Moldova.

"The European role is growing. Any claim by Russia that we will solve our problems ourselves and don't interfere has been greatly undermined," said Lukyanov.

[AFP / Expatica]

1 Comment To This Article

  • kolobrzeg posted:

    on 12th January 2009, 13:25:18 - Reply

    Not for the first time Europe becomes the distinctive hostage of gas dispute, remembering the situation in January, 2006. Then very many people in EU have taken the side of Ukraine, at least, having agreed with argument according attempt of use of gas for political pressure of Moscow upon Kiev. For the present moment in EU a point of view over the attempt of the Russian Federation to revenge Ukraine for providing support to Georgia in August of the past year exists.
    Now to the Ukrainian gas-transport system the gas intended for Europe arrives in extremely small volumes, or does not arrive at all. In accordance with the statements of both parties it is practically impossible to understand accurately who has made decision to block this gas - Russia or Ukraine. And the European point of view, on a large scale, in the current moment the main problem is not on of the reason of a fault of arriving gas, but the fact of its absence. Especially it concerns the countries of southeast and central Europe which remained in general without gas. They aspire whenever possible faster resolution of dispute between Ukraine and Russia.

    The Ukrainian gas-transport system is the integral component of system of energy safety maintenance of EU.
    The gas-transport system of Ukraine (GTS) includes 37,6 thousand km of gas pipelines of different function and productivity, 73 compressor stations with automatic compressor shops where it is established 703 units for gas transition by the general capacity of 5,4 thousand Мwt, 1607 gas-distributing stations, 13 underground storehouses of gas with the general spaciousness on active gas over 32,0 billion cubic m and objects of an infrastructure. On "input" GTS is capable to accept in 290 billion cubic m, and on "exit" to transfer 175 billion cubic m of natural gas, including 140 billion cubic m to the countries of the Western and Central Europe. Maintenance of consumers with natural gas is carried out by gas networks pressure to 1,2 Mpa which length makes close to 287 thousand in km. A necessary mode of gas supply in these networks provide about 51 thousand gas-regulating stations (GRS). Considering terms of operation of gas pipelines and their technical condition, for maintenance of reliable and effective functioning till 2015 it is planned to finish reconstruction of all compressor stations completely. Till 2030 it is provided modernization and technical re-equipment of gas-transport system with use of the most modern and effective technologies should be finished by then. It is planned to finish congestion GTS to design indicators and increase in its transit capacities at 30-35 billion cubic m of gas a year at the expense of building new stations.
    Thus, the Ukrainian gas-transport system is an integral part of the gas market of Europe and always it will. Hence, the European Commission wishes to see Ukraine completely integrated into the power market of the European Union. It is a question of it and in the communiqué of European Commission for the Council of EU and for the European Parliament concerning “Eastern partnership” which confirms confidence of Europe of the important role of Ukraine in the process of maintenance of energy safety of Europe. Strengthening of support of full integration of the energy market of Ukraine to the EU’s market will be provided at the expense of the priorities allocated with European Commission from modernization of the Ukrainian gas-transport and petro-transport system, including improvement of system of monitoring behind oil and gas transportation. During the consultation process concerning cooperation deepening between Ukraine and the European Union which took place on December, 3-5 in Bruxelles, EU were confirmed with the intention on practical support of initiatives of Ukraine directed on increase of reliability and safety of deliveries and transit of gas and oil using the Ukrainian infrastructure.

    It is impossible to deny the fact, that over a total period of export and transit deliveries of gas, mentioned period exceeds half-centuries, the Ukrainian gas-transport system has never given failure, and for the sake of the further increase of reliability of gas-transport system of Ukraine the program of its reconstruction and modernization which, in particular, provides replacement of units of swapping of gas, diagnostics and repair of a linear part of gas pipelines is realized; building of new pipelines, introduction of the European standards of operation, application of energy-efficient technologies, decrease in negative influence on environment.
    On purpose in the future of preventing harm to energy safety to Europe it is necessary to create commission, which will carry out monitoring of receipt of gas in a gas pipeline to be convinced, whether gas or not which as Russia confirms, were misappropriated by Ukraine though it was impossible to assume, is delivered actually, considering a number of the obvious facts.
    If both parties have agreed on such monitoring, it would help with the conflict decision. It would be possible to make active some positions of the European power Charter which Ukraine, unlike Russia, ratified.
    In Bruxelles the Charter secretary has received from Ukraine guarantees of uninterrupted transit of gas to Europe. Now Ukraine declares, that it simply HAS nothing to transport to Europe. All control points which are responsible for the termination of supply of the Russian gas for the European consumers through territory of Ukraine, are situated in the territory of the Russian Federation. All responsibility for their work lays exclusively on Open Stock Company “Gazprom”. Therefore also independent monitoring is necessary.
    Pricing on gas for Russia is the very delicate point, taking into consideration losses of the country against falling of the prices for energy carriers. Ukraine, for its part, also strongly suffered from crisis, and in general always had problems with payment of import of the gas which huge volumes consumes. At the same time birches of races of the prices for gas delivery (to 418 dollars for 1000 cubic metre) conducts only to blasting of economy of the consumer which in turn will negatively be displayed on bilateral economic relations of the next states which have powerful mutually advantageous trade barter.
    Therefore, it is necessary to continue at EU support negotiations between the Russian Federation and Ukraine and as a variant, to develop the stage-by-stage plan about creation of the prices for the energy carriers considering all factors, including expenses for transit on territory of Ukraine.