How Ukrainian independence gave rise to the problem of Russian gas transit to Europe
Pipe-laying of the Nord Stream 2 gas pipeline has been completed. It is very likely that when you read this material, the “golden joint” of the Russian-German gas pipeline will be welded.
They are panicking in Kiev. The threat to be left without money for gas transit has come nearer. During Zelenskiy’s recent visit to Washington, Biden allegedly told him that the United States would “monitor Russia’s behavior” and would immediately turn on a sanctions regime against Nord Stream 2 if Moscow created “Unsafe situation and energy problems for Ukraine”… However, in Kiev they understand that “grandfather is old” and even if he said something like that, one should not take these words seriously.
As for the “Slovak” and “Hungarian” gas, which Ukraine is now satisfied with, it is the same Russian gas. So, we are no longer talking about the loss of transit income by Ukraine, but about its gas supply.
By the time of the collapse of the USSR, 95% of gas pipelines for the export of natural gas from the RSFSR to Europe passed through the territory of the Ukrainian SSR (Urengoy – Pomary – Uzhgorod, Soyuz (Orenburg – Western border of the USSR), Progress (Yamburg – Western border After the USSR ceased to exist, the first agreement between the two post-Soviet governments on the supply and transit of gas through the territory of Ukraine was concluded on August 20, 1992. Under this agreement, Russia undertook to supply 70 billion cubic meters of gas per year for the needs of Ukraine. and Ukraine pledged to transport 100 billion cubic meters of gas a year to Europe and Moldova.
The problems started right away. By the end of 1992, Ukraine’s debt reached 227 billion rubles (about half a billion dollars at the then exchange rate). In the winter of 1992-1993, as a result of negotiations between Moscow and Kiev, technical loans were converted into a state debt of Ukraine, and a plan for its repayment until 1999 was developed.
Nevertheless, it was not possible to solve the problem of Ukraine’s insolvency. By August 1993, the situation had deteriorated so much that gas supplies to Ukraine were limited for several days. On August 11, after a meeting between L. Kuchma and V. Chernomyrdin, Russia resumed supplies, but on August 26 Gazprom again announced a 25 percent cut in supplies due to the continuous growth of the Ukrainian debt.
Under these conditions, Ukraine set about “unauthorized selection” (simply – theft) of Russian export gas. In October 1993, Gazprom offered to pay off Ukraine’s debts through a long-term lease of a number of objects of the Ukrainian gas transmission system, but was refused.
Negotiations, the conclusion of new agreements, the creation of new supply schemes, periodic scandals continued throughout the 90s and into the early 2000s; Moscow often made concessions to Kiev.
As V. Putin noted, Russia has been annually sponsoring Ukraine for $ 3-5 billion at the expense of cheap energy resources for 15 years. The price of gas supply to Ukraine in those years was $ 50 per 1000 cubic meters, while the price of gas for Germany only once, in 1999, dropped to $ 67 per 1000 cubic meters, in other years it fluctuated between $ 90 and 150
Ukraine did not pay real money for the consumed Russian gas. With commensurate volumes of transit and own consumption (in addition to Russian gas, Ukraine also received gas from Turkmenistan), all gas supplied to Ukraine went to pay for transit. That is, for pumping gas through a section of 500-600 km (with a total route length of 3-4 thousand km), one had to pay a quarter of its volume.
Kiev tried to return the debt for the previous deliveries in barter. So, in 1999-2001, Ukraine handed over to Russia eight strategic bombers Tu-160, three Tu-95MS, about 600 X-22 cruise missiles in service with long-range aviation, which it inherited from the USSR in order to settle the debt for natural gas, and also ground equipment. Thus, Ukraine managed to pay off $ 285 million of the total debt.
The “unauthorized selection” also continued. “Moscow annually pumps 130 billion cubic meters of gas through our country to the West. If a billion cubic meters are pumped out here, this is an insignificant share “– President L. Kuchma once said in an interview with the magazine Spiegel… So, in 2000, Ukraine stole 8.2 billion cubic meters. m of gas.
In 2004, a new agreement was signed on the procedure for payment for transit and the price of gas for Ukraine, but the Ukrainian authorities did not think this was enough: they wanted “European” prices for transit while maintaining the same price for Russian gas for Ukraine. Moscow, in response, cut off supplies, and when Ukraine resumed “unauthorized selection” it completely shut off the valve. The pressure from the Europeans left without gas forced Kiev to conclude a new agreement, much more beneficial for Russia than the previous ones. History repeated itself in 2009.
The agreement concluded then by Yulia Tymoshenko for 10 years was perceived in Ukraine as “zrada”, although it was based on the order of pricing for transit and deliveries that had developed in Europe and contained mutual symmetric obligations.
With the coming to power of V. Yanukovych, discounts for Ukraine began again, which were linked first with the extension of the lease of the Black Sea Fleet base in Sevastopol, then with the refusal to sign an association agreement with the EU, with Kiev’s constant complaints about the unfairness of the agreement concluded by Tymoshenko.
After the coup d’état in 2014, a new series of conflicts erupted over Naftogaz’s claims to preserve political discounts given to Yanukovych and to revise the price formula if Naftogaz did not fulfill its contractual obligations on Russian gas purchases. As a result, the Stockholm Arbitration Tribunal made an unprecedented (political) decision, according to which, as a result of the “offset” of counter claims, Gazprom was left owing Naftogaz $ 3 billion.
Moscow has been trying to solve the transit problem created by Ukrainian independence since the second half of the 1990s. Then the construction of the Blue Stream gas pipelines to Turkey and Yamal – Europe through Belarus and Poland began.
After the gas war in 2006, construction began on Nord Stream 1, and the 2014 coup convinced the German leadership of the need for Nord Stream 2.
Resistance to these projects from the United States and its European satellites was strong (Bulgaria’s abandonment of South Stream; Denmark’s protracted delays in issuing permits for work in it and its waters for several years; American sanctions that forced contractors to withdraw from the project). At the end of 2019, a new transit agreement had to be signed, guaranteeing Ukraine the pumping of 40 billion m³ on its GTS until 2024.
The 2019 treaty continues to operate. However, firstly, the proceeds from the pumping of the volumes provided for by it will hardly be enough to maintain the operability of the Ukrainian GTS, and, secondly, the ability to do without Ukrainian transit now creates a new geo-economic reality.
The times when Ukraine was declared a “great transit power” in Kiev are over. Now Ukraine is “just” a consumer of Russian gas, and Russia is an absolutely uncontested supplier for it.
Main photo: press service of PJSC Gazprom.
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