Europe is not afraid of gas crisis

Europe is not afraid of gas crisis

By Vestnik Kavkaza

This summer gas prices grew in the EU market by 21%, as Gazprom shifted Ukraine to prepay conditions. Experts explain the growth of prices id due to the fact that tensions in Russian-Ukrainian relations will lead to problems with gas supplies. Bloomberg notes that half of Ukrainian gas storages are empty, and the authorities have declared a regime of gas economy. Kiev plans to cover 50% of imported gas demand with supplies from Slovakia, Hungary, and Poland. According to Interfax, in the first six months of 2014 Ukraine imported 4.172 billion cubic meters of gas from the EU. That is 40% more than during the same period last year. In August, Ukraine adopted a law which allows for the possibility of forbidding gas transit on its territory to Gazprom. It suggested that European partners should purchase gas on the Western border of Russia and sign direct contracts on its transit through Ukrainian territory. The EU believes that this will require reconsideration of transit contracts and will take a lot of time.

However, Stefan Koler, the head of the German Energy Agency, doesn’t see any signs in the sphere of European energy: “The situation in Germany and Western Europe is not characterized by tension. Prices are more decreasing than increasing. We cannot say that the events in Ukraine, Iraq, and other restless places have caused a growth in prices. Oil prices are decreasing, and it doesn’t mean any crisis. As for the gas sphere, in which Russia plays a significant role, we don’t see any crisis discussions in it either.”

As for Ukraine, according to Koler, “the situation is not critical at the moment. Underground storages are well filled. European and German storages are full. So I don’t think we should make a drama out of the situation. We should think about possible conflicts, when winter comes. Ukraine as a transit country is very important from this point of view. And we should think about measures which will prevent transit issues from breaking harmonious relations between Russia and Western Europe.”

According to Koler, German companies are eyeing up the oil-and-gas infrastructure of Ukraine: “We can definitely say that European and German enterprises are ready to participate in the Ukrainian gas market. Our companies have already begun to enter the market. The main thing is to define a strategy which we will follow. Development should be together with Russia to build infrastructure for the future. Western enterprises should not invest against Russia. We should try to find common strategies and implement them. At the economic forum in St. Petersburg our president clearly said that a settlement of the Ukrainian issue is possible only through joint efforts, only if Russia and Europe cooperate, rather than oppose each other. Neither Russia nor Western Europe can settle the Ukrainian conflict independently. So we have to develop a joint strategy, i.e. cooperation rather than confrontation.”

Bahruz Abdolvand, the director of the Berlin Center for Caspian Region Studies, said that since 1994 gas transit through Ukrainian territory had many times been used as a political argument. He emphasizes that in the issue all sides depend on each other: “Diversification is important for every partner. I mean relations between Russia and Europe, Russia and China… Energy markets are not markets of producers, but markets of consumers. I mean the gas market. The situation with supplies is quite normal there.”

Ivan Grachev, the head of the State Duma Committee for Energy, thinks that both Russia and the EU are interested in extension of gas supplies to Europe, while calling for a reduction of Russian gas consumption is not reasonable: “Real solar and wind energy, considering big volumes, is fivefold or tenfold more expensive than gas production. Gas can be replaced only by coal, speaking about prices.” According to him, the “green,” environmentally-friendly development which was chosen by Europe is built on Russian gas; that’s why Russian gas imports will grow, as there are enough resources in Russia to export not just the current 160 billion cubic meters, but 200 billion cubic meters to Europe.”

However, Grachev thinks there are problems with gas transit through Ukrainian territory: “First of all, when winter comes, they will begin to use gas which is technologically needed for uninterrupted supply of gas to Europe. It is impossible to imagine that they will survive winter without gas imports from Russia – and they don’t pay for it – and without taking gas from underground storages. They have no money to pay for Russian gas. And before the war in the East stops, they will have no money. The loan which they received from the IMF was spent on social needs and the war… They have no resources to pay for Russian gas, and this is a big problem which concerns Europe.”

Grachev is indignant at the fact that “Ukraine tries to sell Ukrainian pipelines to the USA instead of signing a trilateral contract between Germany, Russia and Ukraine. It is the interference of geopolitics in economics. We cannot say how the American owners of the pipelines will act under the regime. I don’t think they will care about European interests.”