If the flow of gas from Turkmenistan to Ukraine is to resume, the decisive factors will be political not economic, and they will be decided in Moscow, not Kiev or Ashgabat.
And so Ukrainian President Viktor Yanukovych’s visit to Moscow this week will be watched with interest for developments over energy cooperation.
Yanukovych set an apparently combative tone Friday when he told reporters that Kiev would not “sacrifice it’s sovereignty” while negotiating on the price paid for Russian gas.
Ukraine is currently bound by a 10-year take-or-pay deal with Russia’s Gazprom that leaves it open to punishing claims if it fails to buy less than given quantities of gas over a particular year.
A perceived shortfall in gas imports from Russia last year last month prompted Gazprom to claim $7 billion from state-run Naftogaz Ukrainy. The sum is clearly purposeful in its unrealism.
 Ukraine currently pays around $430 per 1,000 cubic meters for Russian gas.
“It’s clear that we have to make concessions and find a price that Russia will accept to change the contract,” Yanukovych said Friday.
Indulging in some creative thinking, Ukraine now speaks of developing its substantial reserves of shale gas and, on Friday, of bypassing Bosphorous routes for liquified natural gas imports.
“We see there is such an opportunity, the building of a gas terminal in the Mediterranean in front of the Bosporus, so that it does not go through the Bosporus, and build a terminal there,” Yanukovych said. “If we are able to do this — we are now working on this — we will have another opportunity to transport up to 10 billion, 7 to 10 billion cubic meters from these liquefied gas terminals,” he said.
Bringing cheaper Central Asian gas into the mix is evidently what Ukraine sees as another route out of the impasse.
What is abundantly clear is that this is most likely to happen if Kiev relinquishes control over its domestic natural pipeline network. Such a scenario was firmly resisted in the past, but has now evolved into a certainty that explains Yanukovych’s need to protest that he will protect his country’s sovereignty.
The proposal in the air is that a consortium involving Gazprom would operate the pipelines, finally giving Moscow the control over transit that is has so long sought. Yanukovych plaintively stated Friday that Kiev would seek assurances that it would still be able to make the call on what gas could transit to Europe.
“We want for the Ukrainian (gas transportation system) to work reliably, for it to be able to pump certain amounts of gas to Europe — the more, the better. And we want it to be technically modernised,” he said.
And, going by what Ukrainian officials said last month during Yanukovych’s visit to Ashgabat, some of that gas should be Turkmen and sold onward to Western Europe for Kiev’s profit.
Yanukovych is now also talking about “de-monopolising” the gas market, which sounds a signal for allowing in Russian and other investors. He has also made more positive noises about the Moscow-dominated Customs Union, tentatively committing his nation’s fate eastward.
The European Union, meanwhile, looks on with a degree of trepidation. Interfax cited the EU envoy to Ukraine, Jan Tombinski, as saying Friday that one option was was a three-way EU-Russian-Ukrainian consortium running the pipelines.
Whatever the outcome, the Ukrainian pipeline taboo is now broken, and that could set the stage for Turkmenistan’s long-held ambition to see its gas delivered to European households.
The finer details of the arrangement — which will be mired in the standard opaqueness and doubtless subject to all manner of financial chicanery — are yet to be decided.

Advertisements