On 3 May, Ukraine and the EU are expected to hold a roundtable in Brussels regarding further development of the Ukrainian gas market. The roundtable, which will be chaired by EU Energy Commissioner Günther Oettinger and Ukraine’s Energy Minister Stavytsyi, is expected to discuss the modernisation of the Ukrainian gas transportation system or GTS and the establishment of the Eastern European gas hub in Ukraine. Most of the leading gas companies, including Russian gas monopoly Gazprom have been invited.
However, Olga Shumylo-Tapiola, visiting scholar at Carnegie Europe in Brussels, told New Europe that Ukraine and the EU have different expectations.
“The EU expects Ukraine to reform and for that it’s interested in getting engaged with Ukraine be that modernisation of Ukrainian gas transit system or reform of energy sectors as such. Ukrainians, when they think of EU engagement, they want support with the negotiations with Russia over gas price, full stop. I don’t think that Ukrainians are interested in having the EU as part of the trilateral consortium of management of gas transit system,” Shumylo-Tapiola said.
If the modernisation of Ukraine’s gas transit system proceeds, the EU would be a facilitator for European investors to join the process. Shumylo-Tapiola said she doubts the Ukrainian side is interested in modernisation now. “I think they want short-term solutions, reverse gas from the EU for instance. They want to give Shell some access to drill in Ukraine,” she said.
Balazs Jarabik, from the European Council on Foreign Relations, told New Europe that 50% of the gas which stays in Ukraine is used for households and is controlled by the oligarchs. “Based on this, I do not believe that oligarchs would be willing to give control of the pipelines to Russia,” he said.
Now regarding the modernisation of the pipelines, there is a geopolitical game, he said, adding that Russia is willing to build more pipelines dispatching Ukraine.
The government of Ukrainian President Viktor Yanukovych government is also taking the steps to diversify the country’s gas resources, especially looking to tap into shale gas. “But this is also a dangerous game on the other side if the Russians are really building the pipelines they promised to because then the Russians can cut the gas for Ukraine without endangering Europe,” Jarabik said.
He said Ukrainians should have an interest in the modernisation of the GTS. “But given these geopolitical games, unfortunately I see little practical possibility that the Ukrainian government will actually do it,” he said.
“Russia is deliberately selling Belarus for the Customs Union membership very cheap gas, signalling to Ukraine this is what you can get. So there is an incentive to the Ukrainian side not only the modernisation but the cheap gas. So far the elite are very clear that they do not want to do this with Russia. But the question is whether the economic situation is going to force them to do it, what will they do,” Jarabik said.
Shumylo-Tapiola said she doesn’t think the Ukrainian President is interested in Customs Union in the first place and that the price of cheaper gas in return for membership in the Customs Union will work for Yanukovych at least for the next two years.
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