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Focus on Ukraine, January 12-18, 2009

January 18, 2009

Overview of political events of the week

January 12

Premier of Ukraine Yulia Tymoshenko informed at a joint press conference with Czech Premier Mirek Topolanek that Ukraine signed a protocol on control over the transit of Russian gas through Ukraine, which the European Commission and Russia signed the day before.
The protocol gives experts access to study Ukraine’s gas transport grid and partially that of Russia to monitor the transportation of Russian gas. In essence, this means that all three parties to the protocol – Russia, Ukraine and the EU – agreed to mutual regulations concerning the transit of gas, which was the main requirement of the Kremlin for its renewal.
The statement made by the Ukrainian party that Ukraine did not siphon gas and is a reliable partner for its transit was stricken from the document. The Kremlin did not accept such amendments.
As is common knowledge, Europe has not received Russian gas delivered through the territory of Ukraine since January 7. As of January 9 Ukraine began delivering gas from its own reserves to Moldova and Bulgaria, which ended up in a very precarious situation due to the supply of natural gas from Russia being suspended.


Russia’s Premier Vladimir Putin stated in an interview for the German TV channel ARD that Russia is prepared to participate in the privatization of Ukraine’s gas transport grid should the Ukraine agree.

Ukraine’s Ambassador to Russia Kostyantyn Hryshchenko urged Moscow to recall the “diplomatic” parlance in negotiations instead of holding talks in the vein of blackmail and ultimatums.
The ambassador said that after signing of the protocol about monitoring of the transit of Russian gas through Ukrainian territory by all parties thereto, Russia has no grounds for not renewing the transit of its natural gas to countries of the EU.
Hryshchenko stressed that Ukraine will remain Russia’s main partner in the transit of gas, but on condition that Ukraine’s national gas transit grid is not sold, leased out or privatized.

January 13

The people’s deputies of Ukraine opened the first session of the parliament in 2009 with a review of the gas conflict between Russia and Ukraine. This resulted in the creation of an ad-hoc committee assigned to study the gas issue.
The committee will study the functionality of the gas transit grid and provision of gas to the population for two months under the supervision of deputy of the Party of Regions Inna Bohoslovska. 

Gazprom informed about the renewed delivery of 76.6 million cubic meters of transit gas per day starting 9:00 am Kyiv time in the direction of the Orlivka gas gauging station (GGS) via the Sudzha GGS.
Despite this, Naftogaz Ukraina Chairman Oleh Dubyna informed that the company requrested Gazprom to begin the supply of gas via the Valuyka and Pisarivka GGS instead of the Sudzha GGS. He said that if gas is transited via Sudzha-Orlivka the oblasts of Luhansk, Donetsk, Odesa and partially Dnipropetrovsk will be left without gas due to the reversal of pipelines supplying gas to the domestic market in Ukraine after Russia shut off its supplies.   

President of Ukraine Viktor Yushchenko stated at a press conference that Russia has unleashed a gas war to discredit Ukraine and convince Europe of the need to build a pipeline bypassing Ukraine.
Yushchenko is convinced that the price of gas for Ukraine this year should not exceed US $210 per 1,000 cu. m. This is the residual amount after deduction of fees for the transit of gas to Europe via Ukraine.
Ukraine’s head of state called on Russia to comply with the terms of the Memorandum on the Gradual Transition to the Market Price of Natural Gas. 

January 14

The political opposition summoned Premier Yulia Tymoshenko to report on the results of the government’s work on February 5.
In addition to that, the Party of Regions is demanding that the people’s deputies cancel their winter break and reconvene in a few days. Should the deputies agree to work without a recess the parliament will hear the report of the government as early as January 22.


Ukraine informed the European Union that Russia is preventing the renewal of gas transit to Europe.
Specifically, Premier Yulia Tymoshenko noted that Russia demanded that gas be transited via a route that goes against the flow of Ukrainian gas. Besides that, the current pressure in the gas transport grid does not allow for the transit of the negligible volume of gas that Russia is demanding.
Furthermore, Tymoshenko stressed that Ukraine is prepared for the transit of Russian gas to Europe and expressed her regret that Russia has yet to renew the transit of its gas.

Gazprom claims that Ukraine blocked the transit of Russian gas with reference to the reports of international observers working at Russian and Ukrainian gauging stations.
Specifically, observers in Kyiv informed that Russian gas was not delivered to Europe via Ukraine’s transit grid when the pressure at the Sudzha gauging station in the Kursk oblast was 70 atmospheres at entry to gas gauging stations in Ukraine.


Premier Yulia Tymoshenko stated she wants to reach an agreement with Russian Premier Vladimir Putin on renewing talks about the supply of gas to Ukraine in foreseeable future.She noted progress in talks regarding the supply of gas in 2009. The approximate price of gas for Ukraine was US $235 and transit fees were calculated at US $1.70-1.80. But as Tymoshenko explained, talks were disrupted by politicians and businesses interested in retaining their intermediaries in relations between Kyiv and Moscow.


President Viktor Yushchenko stated at a joint press conference with Polish President Lech Kaczynski that Ukraine is ready to prove in a court of law that it was not privy to the cut-off gas supplies to Europe.
Yushchenko called upon the European Commission to form an investigative committee that would look into the reasons for the gas crisis and review the statements of Russia concerning illegal siphoning of gas on the part of Ukraine.
The president is also demanding that Russia renew talks regarding a contract for 2009. Yushchenko stated that Ukraine needs 55 billion cubic meters of gas per year, 12% of which should be technical fuel. On these conditions Ukraine’s gas transit grid can support the renewal of gas transit to Europe.


Ukraine’s Minister of Fuel and Energy Yuriy Prodan stated today that Ukraine has requested the European Union to convince Russia to change the direction of gas transit via Ukraine onto Europe.
In particular, he noted that he sent a letter to European Commissioner on Energy Issue Andris Pibalgs requesting that he speed up the signing of a provisional technical agreement between Naftogaz and Gazprom.
Prodan pointed out that the actual routes of fuel transportation should be outlined in this agreement and an agreement should be made concerning technical gas, without which Ukraine will not be able to execute transit of gas.

January 15

226 people’s deputies voted in favor of cancelling their two-week vacations. Next week they will work in committees and factions and from January 26-30 – in districts.
VR Speaker Volodymyr Lytvyn informed that the current session of the parliament will close on the first working day of the 4th session on February 3.
The parliamentarians once again appealed to the president to dismiss NBU Governor Volodymyr Stelmakh and propose a new candidate.


Presidential Representative on International Energy Security Issues Bohdan Sokolovskiy stated that Ukraine cannot renew the transit of Russian gas until a technical contract regarding its transportation is signed.
Sokolovskiy said that Ukraine cannot physically transit fuel without such an agreement as its volumes, receiving points and quality have not yet been defined. He further informed that Naftogaz Ukrainy submitted to Gazprom two versions of a technical contract a few days ago, but has yet to receive a reply from the Russian side.
In addition to that, Sokolovskiy made public new proposals of the Ukrainian side regarding prices of Russian gas and its transit to Europe in Q1 2009 – US $192.60/1,000 cu. m. at a transit tariff of US $2.20 to US $ 218.80 at a transit tariff of US $2.47.     


President Viktor Yushchenko paid an official visit to London where he held talks with British Prime Minister Gordon Brown on the gas crisis.
As BBC informed, the Ukrainian head of state stressed the political underpinnings of the gas conflict and categorically denied Russia’s accusations of illegal siphoning of gas intended for export.
President Yushchenko emphasized that the supply of European countries with gas via Ukraine’s gas transport grid will be renewed provided that Russia pumps the required volumes of gas to meet Europe’s needs.
The Ukrainian president further stated that if Russia supplies gas in the volumes agreed to by contract, Ukraine gives a 100% guarantee of its delivery.       

January 16

VR Speaker Volodymyr Lytvyn announced at a parliamentary session that Mykola Martynenko was elected the head of the Our Ukraine – People’s Self-defense faction.
Earlier, Vyacheslav Kyrylenko headed the faction. He tendered his resignation in December after 37 of 72 deputies of the OU-PSD supported the formation of a coalition with the YTB and the Lytvyn Bloc.


Premier of the Czech Republic Mirek Topolanek stated that the gas conflict between Ukraine and Russia has tried the patience of the European Union.
Today the EU threatened that if Ukraine and Russia do not rectify the situation with gas transit, the body will reconsider its relations with the two countries.
In light of this, the EU is looking forward to the next energy summit planned to be held in one of the European countries.     

January 17

UkrTransGaz sent an open letter to Gazprom in which it accused the Russian company of deliberate choice of a technically improbable scheme for the transportation of gas to European consumers.
Recall that Gazprom for the fifth time sent a demand for the transit of nearly 100 million cubic meters of gas a day via Sudzhu in the direction of the Orlivka and Uzhgorod stations, which Ukraine technically cannot fulfil. Gazprom rejected all alternative ways of transporting gas to Europe that Ukraine proposed.


The summit of heads of state and governments regarding the renewal of supply of Russian gas to European consumers held in Moscow today was without results.
The European Union immediately issued a statement about its dissatisfaction with the summit.

January 18

Ukrainian Premier Yulia Tymoshenko and Russian Premier Vladmir Putin agreed on late Saturday evening that Russia will fully renew the supply of gas to European consumers and Ukraine will transport it without interruption.
Though the two sides managed to reach a compromise after several hours of talks, the price of the agreement turned out to be rather high for Ukraine. In 2009 Ukraine will purchase gas at European prices, though the price has not been disclosed.
At the same time, Russia will give Ukraine a 20% discount, while the transit fee charged to Russia this year will remain unchanged. 

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