Eurasian Energy Briefs

by Roman Kupchinsky

Ukrainian Prime Minister Yulia Tymoshenko announced that the transit fee for Russian gas going to Europe via the Ukrainian pipeline system will be doubled from $1.70 per 1,000 cubic meters/100 kilometers to $3.40. Tymoshenko did not specify when the new transit fee will take effect – presumably it will begin in January 2010.

The announcement came on the eve of Tymoshenko’s visit to Russian Prime Minister Vladimir Putin to discuss the gas trade between the two countries. Tymoshenko has been upbeat in her public statements about the reliability of the Russian Federation to meet its commitments in the gas trade and praised Putin for “never letting her down.”

Ukrainian President Viktor Yushchenko however, takes a less benign view of the gas trade between the two countries. In an open letter to Russian President Dmitri Medvedev on November 19 posted on his website, Yushchenko urges the Russian president to consider changing the January 2009 gas supply and transit contract which he considers as harmful to Ukrainian interests.

Gazprom, meanwhile, has threatened to demand some $8.5 billion in penalties from Ukraine for not fulfilling its 2009 gas purchase contract. Ukraine has purchased some 14 billion cubic meters less than what it contracted for in 2009.

The Ukrainian side is disputing this figure and many analysts fear that a combination of the increase in the transit price and the unwillingness of Ukraine to pay the alleged penalties might result in another gas war” which could lead to a shut-off of gas supplies to Europe in the coming winter months.

Moreover, East Week, published by the Polish Center for Eastern Studies reported that Tymoshenko has admitted that extending co-operation with the IMF is Ukraine’s only anti-crisis program. After the suspension of the program, Ukraine is unlikely to receive short-term support from other international institutions and Western states, which have made their loans conditional on Ukraine’s continued co-operation with the IMF.

No support would be forthcoming from the European Commission (€610 million), the World Bank (US$500 million) or the EBRD (the first payment of US$300 million under the loan to Naftohaz) should be expected until Ukraine resumes co-operation with the IMF. Both Tymoshenko and Yushchenko had hoped on IMF funds to help them pay off gas debts to Russia and not force them to spend their hard currency reserves reputed to be some $30 billion.