When the EU and Ukrainian leaders pledged to work together on reforming Ukraine’s gas transit system, someone forgot to tell... Russia.
The EU and Ukraine last week in Brussels signed a memorandum on modernising Ukraine’s GTS with funds from the EBRD, EIBand World Bank. However, Russia wasn’t a signatory to the agreement. In fact, Russia was not even part of the discussions that led up to this declaration.
Russia does not take these sorts of actions lightly, judging from the rhetoric coming from Prime Minister Vladimir Putin, President Dmitry Medvedev and Energy Minister Sergei Shmatko.
“The gas can’t come anywhere but from Russia,” Putin said at the meeting of senior officials. “But no one has consulted us on this issue.” Putin had already warned that Russia would be forced to “review” its ties with the EU if Moscow was sidelined from consultations. So what the hell was the EU thinking?
Tatiana Mitrova, head of Moscow’s Centre for International Energy Markets Studies at the Russian Academy of Sciences, told New Europe that from the very beginning it was clear if European politicians started to discuss with Ukraine the modernisation and reconstruction of the country’s gas transport system, ignoring Russia, Moscow’s reaction would be negative. “Russia doesn’t exist as a part in this document and is not even mentioned in this document, which is very, very strange if Russian gas is to be transported through this system,” Mitrova said, laughing. She noted that the faster Brussels moves to repair the damage, the better for EU-Russia relations.
Ferran Tarradellas Espuny, spokesman for EU Energy Commissioner Andris Piebalgs, told New Europe on March 27 that Brussels didn’t mean any harm. “It definitely was not a hostile act. It was simply a bilateral paper between the EU and Ukraine for a conference that was been planned for many years for which the Russians have received information and it was no secret to anyone. We will continue to work with Russia on that,” Tarradellas Espuny said.
Ukrainian Prime Minister Yulia Tymoshenko also tried to clean up the mess, saying that she is confident that all the misunderstandings between Russia and the EU will be ironed out soon. “The head of the European Commission and I stated that the modernisation process is open to Russia and private investors under the terms that the GTS remains under Ukraine’s ownership,” Tymoshenko was quoted by the press as saying from Tokyo.
A motive behind Moscow’s strong reaction may be Russia’s desire to return on the agenda the issue of the formation of a consortium on controlling Ukraine‘s gas transportation system, an idea Russia has promoted in the past. Mitrova noted that EUUkraine discussions were not about assets or ownership, but operation of Ukraine’s gas transport system. “For Russia, operation — who is in charge of operation of Ukrainian gas transportation system — is vital question because it affects directly its gas transit, so in this case at least they had to consult with Russia,” Mitrova told New Europe, adding that Russian gas monopoly Gazprom incurred huge losses during the January gas crisis.
“It’s really a very important question for us,” she said. A key part of the EU-Ukraine declaration signed last week will be separating Ukraine’s Naftogaz from subsidiary Ukrtransgaz, which operates the pipelines, something the EU hopes will lead to further unbundling. A leading foreign businessman told New Europe that although he understands why Ukrtransgaz as the pipeline and storage operator would be the legal entity in which funds could be deposited to modernise Ukraine’s system, however, Ukrtransgaz relies on revenues and gas supplies from Russia. He said investors would only lend money to an organisation if they can see where the income streams and business is mainly focused - and this is Russia.