Gazprom Stokes European Energy Worries
Europe’s annual agony with Russia over energy starts this winter with Gazprom’s threats to cut opposite elastic fluid supplies to Ukraine
As Ukraine and Russia lock horns in their annual tussle over gas bills, Gazprom’s ambitious pipeline programme is stoking Europe’s concerns more than its oriental neighbour’sitting dominance of animation supply routes.
The government-controlled Russian gas giant is threatening to use off Ukraine’sitting stock steady 1 January if Kiev does not pay the outstanding $2bn (£1.4bn) of deficiency. It could also more than double next year’s charges.
Viktor Yushchenko, the Ukrainian President, aforesaid yesterday afternoon that the country had starting paying down the debt. But the claims were met with agnosticism by sources finish to the talks, who said negotiations between Gazprom’sitting deputy chief executive, Alexander Medvedev, and Oleh Dubyna, chief executive of Ukraine’s Naftogaz, were likely to continue through the night.
Possibilities while suffering debate include offsetting the debt with Gazprom’s fees conducive to sending gas for Europe through Ukraine. “One option is to use the pre-payment for transit and thus the debt would be covered,” Sergei Kupriyanov, Gazprom’s spokesman, told a compress conversation yesterday.
Russia and Ukraine fall out over gas every winter. Each time, concern ripples through Europe that the 25 per cent of its gas supplied from Russia, all of which comes through Ukraine, may be disrupted. Gazprom attempted to allay such fears yesterday, only it after that fired a diplomatic warning shot. “The Ukrainian side is demonstrating preparedness to realize its transit obligation in any situation and we are glad to hear that,” Mr Kupriyanov said. “But at the same time we have told our European partners that the way in which Ukraine is fulfilling its obligations does not operate us fully convinced that there will be consummate stores.”
The lasting a year disputation—and Europe’s worried response—is just the tip of the iceberg. Although the spats are ostensibly about riches, Russia is widely viewed with supposition, and often accused of using its resources as a political club to beat opponents down.
There is an other view. “Russia is a very reliable supplier of elastic fluid and always has been, even during the Cold War,” Louise Boddy, from ICIS Heren, the aeriform fluid pricing clump, said. But there is nay in like manner shortage of “evidence” seized upon through the mistrustful. The first row with Ukraine followed choleric on the heels of the Orange Revolution, which brought in a pro-Western control, for example.
The inevitability of demand is one reason that gas is so politicised. The inflexibility of supply is another. Until liquefied natural aeriform fluid (LNG) technology gets going, gas be possible to only be shipped through expensive, fixed infrastructure, and it does not lend itself to storage. Pipelines are clew, and plans for new ones are a battleground of economics and power-mongering in equal measure.
Russia naturally wants to vindicate its violent position in the EU gas market. It furthermore wants to establish gas supplies that bypass troublesome Ukraine—from this time the Nord Stream pipeline, which runs from Russia to Germany and should be up and running by 2011. But the big plan is South Stream. Although the route is not finalised, the plan is for a network to run from Russia through Bulgaria and then branch into Europe. But Russia does not have the stage to itself. There is stiff competition from Nabucco, a rival pipe that would enter Europe from Azerbaijan via Turkey, and could at last extend as far for example Italy and Austria. The stakes are high, and although diplomatic project leaders maintain that the schemes are complementary, experts be in unison that in that place is unlikely to have being sufficient gas to need two major new pieces of infrastructure.
Nabucco is backed by both Europe and the US since it provides an alternative to dependence on Russia. Although there are no supply contracts yet in place, negotiations are under way with Azeri groups and ultimately—geo-politics notwithstanding—the new infrastructure could even be used to ship aeriform fluid from Iran. The result would be both additional energy assuredness and lower prices.
Moscow, not surprisingly, is not so keen, and is manoeuvring calamitous to make sure its pet project comes out on top. “Russia wants to get more control of EU pipelines, and because Nabucco competes with South Stream, it is using all its influence to prevent its construction,” Jonathan Simpson, a partner at Paul Hastings, the international law firm, said.
Just before Christmas, Gazprom clinched the divide to corrupt Serbia’session state-owned oil and gas company for $400m, on the condition that South Stream get the go-ahead to be built through the country. And there are widespread rumours that Mol, the Hungarian energy collection angling for a majority share in Croatia’s Ina, is only doing so in kind to sell it on to the Russians.
“The view in the place of traffic is that Mol has agreed with Russia to sell its authority, and granting that Russia controls Serbia and Croatia, in oil and gas provisions, then it controls the Balkans,” Mr Simpson said.
Original text: http://rss.businessweek.com/~r/bw_rss/europeindex/~3/499658344/gb20081231_213221.htm
