Winter may be over, but Ukraine’s energy security is looking shakier than ever as it failed to make much progress on a new gas agreement with Russia. Reuters reports:
A preliminary meeting in Brussels on Friday had never been expected to yield major progress, with the two sides still far apart as they jostle for position in the negotiations while European Union officials have set a target date of June for a new accord on how much Ukraine should pay Moscow for its gas.Speaking after the talks, Russian Energy Minister Alexander Novak said Russia would be willing to consider a discount, but a take-or-pay clause that requires Kiev to buy a certain amount of gas whether it needs it or not would apply from April 1.
Take-or-pay clauses have long been a sticking point for Gazprom’s European customers who chafe at the notion of being obligated to buy gas regardless of demand, and already Kiev is pushing back against the possibility that it will be forced to pay up next month. As Ukraine’s energy minister Volodymyr Demchyshyn remarked, “At the moment we don’t need to buy Russian gas. We will simply stop buying it.”Ukraine can afford to be a bit more defiant in its rhetoric now that the weather is warming up and demand for natural gas is slackening. Reuters reports that Europe could help Ukraine to a limited extent, but that ultimately Kiev will have to once again turn to Moscow in preparation for next winter:
Ukraine can buy cheaper gas through reverse flows from the European Union, but that would not be enough to fill storage adequately over the summer months…The Commission has estimated that Ukraine would need 4-6 billion cubic metres of gas from Russia to boost reserves it says need to be built to 19-20 bcm by around October, from about 7.3 bcm now.
Ukraine’s energy strategy—if you can call it that—has been wholly focused on the short-term these last months, and no wonder: Kiev’s highest priority was simply keeping the heat on for its citizens. Now that spring has sprung, Ukraine can reassess and look farther ahead, but what it sees isn’t pretty. There’s no easy—or, perhaps more importantly, cheap—way to diversify away from Russian gas.Kiev has already announced that it intends to use the fact that some 40 percent of Europe’s Russian gas supplies transit Ukraine as leverage in its negotiations with Moscow. From Putin’s perspective, that’s actually a good reason to play hardball—if Ukraine won’t pay, the rest of Europe likely will if only to secure their own gas.