Germany accused Ukraine of stealing gas

The German Ruhrgas Company has declared that Ukraine has been pumping out fuel during the gas transit from Russia. Spokesman for the company Andreas Reichel commenting on reduction of gas supplies by 30% on January 2, said: “The gas was definitely pumped out in Ukraine.”

At the same time, as Ekho Moskvy reports, Ukrainian National Security Council Secretary Anatoly Kinakh says that “Ukraine has not been pumping out the gas without sanctions.”

Belgium to host Gazprom's $5.7-bln gas storage facility
18/01/2006 16:54

BRUSSELS, January 18 (RIA Novosti, Alexander Shishlo) - The precise location of the $5.7-billion underground gas storage facility in Belgium that would pump Russian natural gas to Western Europe is under consideration, Russian Ambassador to Belgium Vadim Lukov said Wednesday.

However, the 500-million cu m storage facility, designed to ensure gas deliveries through a Russian pipeline to Great Britain, is expected to be operational in 2010, Lukov said.

According to the ambassador, Belgian and Dutch companies have expressed interest in the project. He did not exclude the possibility of using the storage facility as a terminal for exports of Russian gas to countries that would include Belgium.

Lukov highlighted expanding economic ties between Russia and Belgium. According to preliminary data, Russian-Belgian trade in 2005 increased 30% year-on-year, reaching 6 billion euros ($7.3 billion).

Russian energy giant Gazprom and a number of Belgian energy companies have reportedly formed the Belgian Underground Gas Storage (BUGS), which has already received permission to build the facility in the Campine area near the Belgian port of Antwerp.

Lukov said Gazprom has built 63 underground gas storage facilities outside Russia.

The provisional deadline for the construction of the facility coincides with the deadline for commissioning of the North European Gas Pipeline (NEGP), a pet project of Gazprom's top officials, which would allow Gazprom to diversify its export routes and bring natural gas to Western Europe, avoiding transit states along its route and pumping gas under the Baltic Sea directly to Germany.
http://en.rian.ru/business/20060118/43063007.html

Russian gas supplies to Germany reliable - Ruhrgas
08/01/2006 11:11

BERLIN, January 8 (RIA Novosti, Olga Semyonova) - Russian natural gas supplies to Germany are reliable, the chairman of Germany's largest gas company E.ON Ruhrgas said Sunday in an interview with a popular German magazine.

Burckhard Bergmann told Focus that Russia had been unfailingly supplying natural gas to Germany for more than 30 years.

He spoke against the attempts to extrapolate the Russian-Ukrainian gas dispute to the German-Russian relations. He said both countries had long-term contracts clearly defining the price and the amount of natural gas supplies. Bergmann said there was no misunderstanding in bilateral gas relations, adding that Germany paid market prices for Russian natural gas.

The head of E.ON Ruhrgas also said the Russian-German project to build the North European Gas Pipeline along the bottom of the Baltic Sea was important to ensure direct gas deliveries to European consumers.
http://en.rian.ru/business/20060108/42892099.htm

Several points omitted in the Western media on the recent Russian-Ukrainian gas conflict.

1. Gas prices in Europe rose from approx. $120-140/1000 c m in 20012002 to $230-250 in 2005, so there is much economic sense in raising the prices for the Russian gas to neighboring states. Gazprom, of course, is currently being liberalized and almost 50% of shares will be sold to foreigners.
2. Gazprom offered $160/1000 c m to Ukraine at first and gave a 3 month-or-so deadline to reach an agreement...Ukraine stalled and instead politicized the issue by stating that they will consult with US and EU ! Once the deadline expired in early December Gazprom could no longer offer the compromise price and charged European prices. The $230 was probably a negotiation position because Ukraine was expected to ask much less. After the crisis, S&P raised Gazprom’s rating to BB+.
3. In 2005 Ukraine has reneged on the Single Economic Space agreements, reneged on the agreement with Germany and Russia to create a consortium for safe gas transportation to Europe. These agreements were tied to the cheap gas prices for Ukraine; that was a political decision. Yushchenko has also reneged on his election promise to South and East Ukraine to grant Russian the official status (second highest after "state" status) and has moved to curtail Russian language in media and schools. He has also tried to rehabilitate the ultra-nationalist organizations that had joined the Nazis in W.W.II, inc. SS formations, and has been trying to get Ukraine into NATO....so how can anyone claim that it was Russian decision that was political ? The move towards market principles with Ukraine was the end of politics and the beginning of market relations. When there was a relatively cooperative government in Ukraine, Russia made political decisions and sold gas on the cheap. Now the Russian leadership has perhaps decided to treat Ukraine like Poland or Romania in questions of gas pricing. Did NATO hope that Russia would finance Ukraine while the latter catered to NATO’s geopolitical ambitions?
4. Azerbaijan's and Armenia’s price was raised from $65 to $110. Neither Azerbaijan nor any other states in the Caucasus are considered market economies. Georgia, which is currently under the western-backed and financed regime, will be paying $110 or $100/1000 c m. Therefore the "political" explanation doesn’t make that much sense since Russia’s ally Armenia, a relatively neutral state Azerbaijan, and a hostile Georgia will pay the same price. EU granted Ukraine a market economy status in 2005; Gazprom moved forward with market principles. In early 2005 the current Ukrainian regime requested market prices for gas transportation to Europe. They used to get more $ by getting Russian gas at $50/1000 in lieu of transportation pay and then reselling it at much higher prices to Europe. Today, however, Gazprom will pay for transportation in cash, but pay more: $1.60/1000 c m /100 km, before it supplied gas as barter to cover the price of $1.09/1000c m/100 km. Each year Russia supplied extra 25 bn c m at $50/1000 c m to cover for transportation, that gas was extra for Ukraine, which consumes 80 bn c m a year, produces 20 bn at home, buys 20 in Russia, and 40 in Turkmenistan, and sells the rest to Europe at market prices. The transition period to market prices for Ukraine was around 12 years of subsidized gas from Russia.
5. Under the new contract, RosUkrEnergo (50% owned by Gazprom, 50% by the Raiffeisen Bank) will buy gas at the Russian Ukrainian border at $230/1000 but sell to Ukraine at $95. The “Russian” gas will be mixed with “Turkmen” gas sold to Ukraine at $50-$60/1000 c m. This year Ukraine plans to buy at most 16.5 bn c m in Russia and 40 bn c m in Turkmenistan. Gazprom will charge $1.6/1000 c m /100 km for transporting Turkmen gas to Ukraine. This is a compromise and a good start for moving Ukraine towards a market economy. The agreement envisions a consortium of Russia-Ukraine (Germany?) by the end of February 2006 for safely transporting Russian gas to Europe.
6. Belarus, not considered a market economy by the EU, gets much cheaper gas as Russia's ally in the region: this situation can be called a political move. But Belarus also offers Russia cheap transportation for Russian goods and people to Kaliningrad, has entered the Single Economic Space and EurasEc projects with Russia and Kazakhstan, is part of the Russia-Belarus Union, and charges much lower transportation fees for Russian gas.
7. Since the early 1990s, Ukraine has taken Russian gas and then resold it to Southeast and Central Europe at market prices, the same prices it now calls “unjustified” when Gazprom wants to move to market relations. Ukraine’s request for yet another “transition period” to European prices comes after over 12 years of thoroughly subsidized prices for Russian gas and disputes over the market relations between Gazprom and Ukraine.
8. Throughout 2005 Gazprom has told Ukraine about its plans to move to internationally-accepted market relations in questions of gas supplies and monetary payments for transportation. Ukraine instead prefers barter schemes so it can take Russian gas as its “due” payment - at its own convenient price - for transportation and then resell it to Europe. This doesn’t have anything to do with Ukrainian “energy security” but is instead a parasitic practice and “transportation blackmail”. Russia had also offered Ukraine a $3.6 bn loan and a Q1 gas price of $50/1000 c m if the contract for the rest of the year was signed before Jan 1, 2006; the Yushchenko regime refused both offers and instead consulted with C. Rice.
9. Are we not told that free market relations are apolitical? Ukraine’s strategy has been to severely politicize the issue, causing the French Foreign Minister Douste-Blazy to warn Ukraine and Europe against politicizing the price dispute.
10. What European or U.S. energy companies make it a practice to subsidize foreign economies? Why should Russia’s Gazprom do that?
11. USSR and then Russia have consistently supplied gas to NATO and EU member states since the late 1960s, during the Cold War. Problems with supplies began to develop with the appearance of Ukrainian middlemen in the 1990s and “strange” disappearances of huge volumes of gas destined for Europe, gas which Russia had to then make up by additional supplies. For decades USSR and Russia had proven and prided themselves on consistent supplies of gas and oil to EU and NATO members. In fact, with the OPEC cutting oil production quotas in 2001, Russia had instead raised its oil exports to Europe, resisting OPEC threats of a price war against Russia and saving billions of dollars to European consumers.
12. Notwithstanding the recent hysteria in the press, Germany, Turkey, and EU are tacitly admitting the unreliability of Ukraine by cooperating on building direct gas routes from Russia, all bypassing Ukraine. Recently, the head of Finland’s Gasum, Bjorn Ahlnas stated that “Finland has never had gas problems with USSR or Russia as no gas transits the Ukraine” while E.on Ruhrgas stated that “Russia has reliably sent gas to Germany for over 30 years. And much more has happened during that time than over the past week.” Key European players like Germany and France do not seem to want the U.S. to control their energy supplies - U.S. bases will be opened in Poland and the Balkans, right along the gas exports routes from Russia. Hence, they have began projects to that first do not pass across the Ukraine (Yamal-Europe, Blue Stream), and those directly to Germany. The latter is the goal of the North European Gas Pipeline that can later be extended to France, affecting two states that opposed US aggression against Iraq. Not one of these projects would be possible without the agreements from importer countries. Belgian and Dutch companies have recently expressed interest in creating a large gas storage facility with Gazprom in Europe.

Yamal-Europe (Russia-Belarus-Poland into Germany; full capacity of 30-32 bn c m in 2006)
Blue Stream (from Russia to Turkey under the Black Sea; full capacity of 16 bn c m in 2012)
North European Gas Pipeline (Russia-Germany-Netherlands-Belgium-France and possibly UK under the Baltic Sea; 1st leg due on line in 2010 for 27.5 bn c m, full capacity of 55 bn c m in 2013)
Shtokman and Ust-Luga LNG plants shipping a total of 20 bn c m year by 2010-2011
Russia sends 140 bn cubic meters of gas to Europe, 120 via Ukraine. By 2013 Russia will be able to export approximately 120 bn cubic meters without Ukrainian middlemen. However, the current crisis might not only give an additional stimulus to key EU states and Russia to implement better gas export routes, but hopefully involve EU, including Germany, in overseeing safe and timely transportation of Russian gas via Ukraine. No realistic Russian leader can have any delusions about the likely reaction of the Western press: clichés, half truths, and the "Russian Boogeyman". Trying to please U.S. and European media is a useless task. It is better to reach an understanding with leading states and companies, have them communicate to Ukraine their concern over gas theft, and establish agreements more favorable to Russia. For some years Yeltsin's government tried the former approach, the Putin team prefers the latter.

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