Ukraine is in emergency talks with European neighbours on the possibility of importing natural gas from the West, following “political” rises in the price it pays for Russian gas, Prime Minister Arseny Yatseniuk said yesterday.
The urgency of securing affordable supplies for Ukraine’s struggling economy has grown since Moscow raised its discounted gas tariff for Kiev twice this week, almost doubling it in three days.
Relations between Ukraine and Russia have turned hostile since popular protests in Kiev ousted pro-Russian president Viktor Yanukovych in February, after which Russia seized Ukraine’s Crimea region and formally annexed it last month.
The dispute has widened into the biggest stand-off between Russia and the West since the end of the Cold War.
Ukraine covers 50 per cent of its gas needs with Russian supplies and also acts as a transit country for onward supplies to European Union countries. It will soon get money from the International Monetary Fund under a new loan package but faces large debts and its economy is in chaos.
Country is dealing with political price rises by Russia
“We are carrying out emergency talks with our European partners. One way to solve the problem is reverse gas from EU countries,” Yatseniuk told reporters, adding that the main candidates for imports were Slovakia, Hungary and Poland. Reverse flows would involve sending gas back down the pipelines used in the transit of Russian gas through Ukraine to Europe.
“On a technical level, the idea of reverse gas raises no problems, and we hope our European partners make the right decision. If it will be to reverse (gas), then it means the price for gas will be $150 lower than Russian gas.”
Russia has decided to raise the price of gas to $485 per 1,000 cubic metres for Ukraine. What this means is that it now pays about the same as Gazprom, Russia’s monopoly gas exporter, charges other customers located in central Europe.
The discounted price had been part of Moscow’s strategy of keeping Ukraine’s centre of political gravity to the East and countering any leanings towards closer ties with Europe.
It was Yanukovych’s rejection of a trade and cooperation deal with the EU that triggered the months of protests that brought him down.
Yatseniuk has called the price hikes “unacceptable” and warned that he also expects Russia to increase pressure on Kiev by limiting supplies. Moscow has frequently used energy as a political weapon when dealing with its neighbours, and European customers are concerned Russia might again cut off deliveries.
“At this price for gas, Ukraine will most likely continue to import and ratchet up its debt. It will happen until either side decides to go to arbitration or Russia decides to cut off deliveries of gas to Ukraine,” said independent energy analyst Valentin Zemlyansky.
“If it goes to the court, we could expect a very long ordeal, but if Gazprom cuts supplies, Ukraine will take gas from volumes intended for European consumers,” he said.
Europe’s natural gas pipeline infrastructure is designed to flow from East to West, pumping Russian gas through Ukraine into western Europe.