EU brokers deal to secure gas supplies to Ukraine and the EU through the winter amid warnings that corruption and conflict could still endanger supplies.
A European Commission-brokered energy agreement to secure the supply of Russian gas to Ukraine and to the European Union this winter was triggered on Tuesday (4 November) when Ukraine’s national gas distributor announced that it had paid Russia a first tranche of debt payments.
Under the terms of the agreement signed in Brussels last Thursday (30 October), Russia should now resume supplies of gas to Ukraine, which it halted in mid-June, provided Ukraine meets a second condition, which is to pay Russia in advance for supplies of gas.
“I am delighted to hear that Ukraine’s Naftohaz has kept its end of the bargain,” said Maroš Šefcˇovicˇ, the European commissioner for the energy union.
The $1.45 billion (€1.15bn) payment is the first of two debt repayments that, together with conditions relating to price and pre-payments, should ensure that Russia supplies Ukraine through to the end of March. The agreement, reached over seven rounds of talks led by Günther Oettinger, who was, until 31 October, the European commissioner for energy, was possible in part because of an EU decision to allow money from its programme of macrofinancial support to Ukraine to be used for gas payments.
Warm winter
Announcing the agreement last week, José Manuel Barroso, the Commission’s president at the time, said there is “no reason for people in Europe to stay cold this winter”. The results of a stress test of the EU’s energy system, published in October, showed that a prolonged halt to the supply of Russian gas through Ukraine to the EU could particularly affect Bulgaria, although the study also suggested that co-operation between EU member states could fully protect Bulgarian households from the cold. However, Serbia and other non-EU countries in the western Balkans could also be affected.
The vulnerability of the region was once again highlighted on Monday (3 November) when the Serbian government reported a drop of 28% in gas supplies from the Russian gas company Gazprom, a reduction interpreted as a prompt to Serbia to pay its gas bill to Russia.
Russia has repeatedly said that the principal threat of disruptions to gas supplies in Europe comes not from Russia, but from the possibility of Ukraine siphoning off gas that Russia supplies to the EU via Ukraine. Ukraine, which has implemented restrictions on domestic consumption of gas, says that it has 15.9 billion cubic metres of gas in store for EU customers.
A senior diplomat from an EU member state who has been negotiating on energy issues with Ukraine and Russia for many years warned, however, that corruption, as well as the ongoing conflict in eastern Ukraine, could still affect supplies of gas to the EU this winter. He argued that the EU had, in its desire to protect Bulgaria and the western Balkans from the cold, effectively accepted “blackmail” by Russia and Ukraine, and should have insisted on the introduction of meters on the Ukrainian side of Ukraine’s border with Russia. The lack of meters left the door open to corruption, a problem that he and his government had seen repeatedly in the 23 years of Ukraine’s independence.
A Ukrainian official said that cost, and the control of some parts of eastern Ukraine by pro-Russian separatists, were reasons why Ukraine has not installed meters. The European diplomat put the cost of a state-of-the-art meter at €30 million at most for each of the four pipelines that lead through Ukraine to the EU, a fraction of the €5bn a year that Ukraine makes from gas transit fees.
Neither the EU nor the International Monetary Fund has made financial support for Ukraine conditional on the introduction of meters at the border.