By Roman Kupchinsky
Ukraine’s state-owned oil and gas company Naftohaz met the July 7 deadline and paid Russia’s Gazprom some $280 million for June gas deliveries. As has been the case every month since February 2009, Gazprom officials had been predicting that Ukraine would be unable to come up with the money and were threatening to demand prepayment if the monthly deadline were missed.
Part of the explanation for the relatively low amount paid for June deliveries is that Ukraine imported a record low amount of gas last month – some 33 million cubic meters a day. The previous bill for May 2009 was higher - $475 million, and was paid in full on June 7.
July however, might prove to be more problematic. Naftohaz increased daily deliveries for July to 120 million cubic meters or 3.5 times the June amount. Most July deliveries will go into underground storage for use during the heating season. The price Ukraine paid for gas in the third quarter of 2009 fell to $198 for 1,000 cubic meters from the second quarter price of $271.
Despite the lower price, Ukraine needs to come up with some $675 million by August 7 to pay for July purchases. The perplexing question is where will the money come from?
On June 29, 2009 the Slovak gas monopoly SPP signed a 10 year contract with Germany’s E.ON to buy 500 million cubic meters of gas annually, or 10 percent of Slovakia’s demand. The deal is being touted as the first step towards diversification of gas supplies to Slovakia which is totally dependent on Russian gas. SPP also announced that it intends to sign a similar agreement with France’s GdF according to the Polish Center for Eastern Studies publication Central European Weekly.
The following day, June 30, Poland signed an agreement with Qatar to buy 1 million tons of LNG (1.5 billion cubic meters) annually beginning in 2014. The Polish state-owned gas company PGNiG eventually hopes to import 5 billion cubic meters of LNG.
The growing trend in Central Europe to diversify gas suppliers could eventually have a ripple effect forcing Gazprom to reevaluate or downsize the expensive and controversial Nord Stream and South Stream gas pipeline projects and explore the much cheaper alternative of modernizing the aging Ukrainian pipeline.
Showing posts with label Ukraine. Show all posts
Showing posts with label Ukraine. Show all posts
Thursday, July 9, 2009
Friday, June 26, 2009
Eurasian Energy Briefs
by Roman Kupchinsky
China continued to forge closer energy ties with Turkmenistan. On June 25, 2009 the China Development Bank signed an agreement with Turkmengaz, the state-owned gas company, promising $4 billion in preferential loans for energy projects. Turkmengaz agreed to boost future gas deliveries to China by 33 percent, from 30 billion cubic meters (bcm) to 40 bcm annually. China National Petroleum is building the 7,000 kilometer (4,300 mile) Central Asia Gas gas pipeline from the Bagtyarlyk region of Turkmenistan that is scheduled to open this year.
Russian energy giant Gazprom began its annual stockholders meeting today in Moscow. On the agenda was the election of a new board of directors. The board is headed by first Deputy Prime Minister Viktor Zubkov and contains four Gazprom managers, including CEO Alexei Miller. Valery Musin , the former teacher of Prime Minister Vladimir Putin and President Dmitry Medvedev at St. Petersburg State University was elected to the board. Professor Musin is one of Russia's leading international business law experts. He served as chief legal expert to the St. Petersburg Mayor's Office Foreign Affairs Department headed at the time by Putin. His election strengthens Putin's grip on Gazprom.
Ukraine’s Naftohaz refuted charges made by Gazprom’s Deputy CEO Alexander Medvedev on June 24, 2009 that storing Russian gas in Ukrainian underground facilities is risky and that Ukraine “stole” 8 billion cubic meters of Russian gas. After the press conference, Gazprom’s press center explained that Medvedev was referring to a dispute which took place in 2004-2005. In response to these charges, the Naftohaz press center stated that it is impossible for Ukraine to steal any Russian gas from its storage facilities because for the past 4 years no Russian gas has ever been stored in them. Furthermore, Naftohaz explained that according to the current contract there is no linkage between storage and the transit of Russian gas to Europe. Naftohaz did indeed offer to store Russian gas this year, but Gazprom refused the offer.
China continued to forge closer energy ties with Turkmenistan. On June 25, 2009 the China Development Bank signed an agreement with Turkmengaz, the state-owned gas company, promising $4 billion in preferential loans for energy projects. Turkmengaz agreed to boost future gas deliveries to China by 33 percent, from 30 billion cubic meters (bcm) to 40 bcm annually. China National Petroleum is building the 7,000 kilometer (4,300 mile) Central Asia Gas gas pipeline from the Bagtyarlyk region of Turkmenistan that is scheduled to open this year.
Russian energy giant Gazprom began its annual stockholders meeting today in Moscow. On the agenda was the election of a new board of directors. The board is headed by first Deputy Prime Minister Viktor Zubkov and contains four Gazprom managers, including CEO Alexei Miller. Valery Musin , the former teacher of Prime Minister Vladimir Putin and President Dmitry Medvedev at St. Petersburg State University was elected to the board. Professor Musin is one of Russia's leading international business law experts. He served as chief legal expert to the St. Petersburg Mayor's Office Foreign Affairs Department headed at the time by Putin. His election strengthens Putin's grip on Gazprom.
Ukraine’s Naftohaz refuted charges made by Gazprom’s Deputy CEO Alexander Medvedev on June 24, 2009 that storing Russian gas in Ukrainian underground facilities is risky and that Ukraine “stole” 8 billion cubic meters of Russian gas. After the press conference, Gazprom’s press center explained that Medvedev was referring to a dispute which took place in 2004-2005. In response to these charges, the Naftohaz press center stated that it is impossible for Ukraine to steal any Russian gas from its storage facilities because for the past 4 years no Russian gas has ever been stored in them. Furthermore, Naftohaz explained that according to the current contract there is no linkage between storage and the transit of Russian gas to Europe. Naftohaz did indeed offer to store Russian gas this year, but Gazprom refused the offer.
Tuesday, June 16, 2009
Viktor Chernomyrdin Removed as Russian Ambassador to Ukraine
by Roman Kupchinsky
Russia’s controversial envoy to Ukraine, the once head of Gazprom and former Russian Prime Minister, Viktor Chernomyrdin was, at long last, recalled to Moscow by Russian President Dmitry Medvedev and offered a position as a consultant to the president. His successor has not yet been named.
Chernomyrdin’s career spans a few decades working in the Russian gas industry. His was a highly controversial career. The 71-year old Chernomyrdin began working in the Orenburg gas fields as a driller in the rough and tumble Soviet gas industry. He worked his way up within the industry and in 1989 became the head of Gazprom. Earlier he had been appointed by Mikhail Gorbachev to be the U.S.S.R. Minister of Gas at which time it was renamed OAO Gazprom. In 2005 the Russian state became the owner of 51 % of the company. In 2001 newly elected Russian President Vladimir Putin appointed Chernomyrdin to become the Russian ambassador to Ukraine. This appointment revealed Putin’s strategy towards Ukraine – gas was the key in Russian-Ukrainian relations and the only person who could represent Russian policy had to be a senior official familiar with the intricacies of Russian gas politics.
Chernomyrdin, however, did not arrive in Ukraine with a clean slate. Earlier, as a member of the Gore-Chernomyrdin Commission, he was suspected of corruption by the U.S. C.I.A. In a report reputedly sent by the C.I.A. to then-U.S. Vice President Al Gore in 1995, the agency cautioned the Vice-President that Chernomyrdin was linked to a number of criminal schemes. Chernomyrdin's private assets accumulated in his official position, according to the alleged C.I.A. report, ran into the billions of dollars. When the secret report reached Vice President Gore, he refused to accept it. Instead, according to several C.I.A. sources, he sent it back to the agency with the word "bull***t" scrawled across it."
As Russia’s Ambassador to Ukraine, Chernomyrdin played a highly controversial role and there were a number of attempts by Ukrainian politicians to have him declared persona non grata for his comments on Ukrainian domestic affairs. Russian political scientist Stanislav Belkovsky told the Ukrainska Pravda website on June 12, that Chernomyrdin had initially been sent as envoy to influence then-Ukrainian President Leonid Kuchma. Once Kuchma left office and after the Kremlin’s unsuccessful attempt to support Viktor Yanukovych’s presidential bid in 2004, Chernomyrdin’s role changed. He became more involved in gas negotiations between Russia and Ukraine and on March 24, 2009, Chernomyrdin was awarded the highest Russian state decoration - the medal “For Services to the Fatherland” from Medvedev.
In February 2009 Chernomyrdin made a number of highly disparaging remarks about Ukrainian President Viktor Yushchenko in an interview for the media. He was summoned to the Ukrainian Foreign Ministry and warned that this type of behavior was incompatible with his status and if he persisted in doing so he would be expelled. According to various sources in Ukraine, the two most likely candidates to replace Chernomyrdin are Gregory Karasin, the Russian Deputy Minister for Foreign Affairs who is responsible for Russian relations with C.I.S. states and Dmitry Rogozin, the Russian representative to N.A.T.O. Whoever is appointed, the overall consensus is that the candidate will be someone with high level access to Medvedev and Putin and be willing to do whatever it takes to help bring Ukraine into the Russian orbit.
Russia’s controversial envoy to Ukraine, the once head of Gazprom and former Russian Prime Minister, Viktor Chernomyrdin was, at long last, recalled to Moscow by Russian President Dmitry Medvedev and offered a position as a consultant to the president. His successor has not yet been named.
Chernomyrdin’s career spans a few decades working in the Russian gas industry. His was a highly controversial career. The 71-year old Chernomyrdin began working in the Orenburg gas fields as a driller in the rough and tumble Soviet gas industry. He worked his way up within the industry and in 1989 became the head of Gazprom. Earlier he had been appointed by Mikhail Gorbachev to be the U.S.S.R. Minister of Gas at which time it was renamed OAO Gazprom. In 2005 the Russian state became the owner of 51 % of the company. In 2001 newly elected Russian President Vladimir Putin appointed Chernomyrdin to become the Russian ambassador to Ukraine. This appointment revealed Putin’s strategy towards Ukraine – gas was the key in Russian-Ukrainian relations and the only person who could represent Russian policy had to be a senior official familiar with the intricacies of Russian gas politics.
Chernomyrdin, however, did not arrive in Ukraine with a clean slate. Earlier, as a member of the Gore-Chernomyrdin Commission, he was suspected of corruption by the U.S. C.I.A. In a report reputedly sent by the C.I.A. to then-U.S. Vice President Al Gore in 1995, the agency cautioned the Vice-President that Chernomyrdin was linked to a number of criminal schemes. Chernomyrdin's private assets accumulated in his official position, according to the alleged C.I.A. report, ran into the billions of dollars. When the secret report reached Vice President Gore, he refused to accept it. Instead, according to several C.I.A. sources, he sent it back to the agency with the word "bull***t" scrawled across it."
As Russia’s Ambassador to Ukraine, Chernomyrdin played a highly controversial role and there were a number of attempts by Ukrainian politicians to have him declared persona non grata for his comments on Ukrainian domestic affairs. Russian political scientist Stanislav Belkovsky told the Ukrainska Pravda website on June 12, that Chernomyrdin had initially been sent as envoy to influence then-Ukrainian President Leonid Kuchma. Once Kuchma left office and after the Kremlin’s unsuccessful attempt to support Viktor Yanukovych’s presidential bid in 2004, Chernomyrdin’s role changed. He became more involved in gas negotiations between Russia and Ukraine and on March 24, 2009, Chernomyrdin was awarded the highest Russian state decoration - the medal “For Services to the Fatherland” from Medvedev.
In February 2009 Chernomyrdin made a number of highly disparaging remarks about Ukrainian President Viktor Yushchenko in an interview for the media. He was summoned to the Ukrainian Foreign Ministry and warned that this type of behavior was incompatible with his status and if he persisted in doing so he would be expelled. According to various sources in Ukraine, the two most likely candidates to replace Chernomyrdin are Gregory Karasin, the Russian Deputy Minister for Foreign Affairs who is responsible for Russian relations with C.I.S. states and Dmitry Rogozin, the Russian representative to N.A.T.O. Whoever is appointed, the overall consensus is that the candidate will be someone with high level access to Medvedev and Putin and be willing to do whatever it takes to help bring Ukraine into the Russian orbit.
Monday, June 8, 2009
Ukraine Pays for May Gas but Future Payments are Unsure
by Roman Kupchinsky
On June 5, 2009, the Ukrainian stated-owned oil and gas concern, Naftohaz Ukrayina, paid Gazprom, the Russian gas monopoly $475 million for gas delivered in May 2009. By beating the June 7th deadline by two days, Naftohaz once again threw a monkey wrench into the propaganda blitz which had been carefully choreographed by Russian Prime Minister Vladimir Putin and Gazprom leadership in order to discredit Ukraine as a reliable transit country in the eyes of the European Union.
Speaking at a meeting of the Ukrainian National Defense and Security Council, Ukrainian President Viktor Yushchenko was uncommonly blunt about the state of affairs at Naftohaz and revealed how the payment was made. “The situation in Naftohaz is critical” Yushchenko stated, “frankly speaking it has never been so severe.” The Ukrainian President stated that Naftohaz owed $157 million for gas which was consumed and almost $500 million for gas placed in underground storage. “I had no choice but to order an emission (of the Ukrainian currency, the hryvnia) and in time the full sum owed Gazprom of 3.8 billion hryvnia will be paid.”
After news of the payment was released, Yushchenko’s advisor for energy matters, Bohdan Sokolovsky demanded that the Russian leadership apologize for their “incorrect and libelous statements about Ukraine’s ability to pay for gas.”
Gazprom officials told Kommersant that at the time the paper went to print they could not confirm receiving a payment, but added that the sum owed Gazprom by Naftohaz was about $640 million.
While the May payment was met before the deadline, Ukrainian officials are worried that this was due to a stopgap measure – a new emission. The average monthly debt to Gazprom is approximately $200 million for consumed gas and $500 million for gas placed into storage.
Come the end of June there remains a real possibility that Ukraine will be unable to pay $700 million for June gas deliveries and this will most likely give Putin the chance to again insist that the E.U. pick up part of the Ukrainian gas tab or else the gas spigot to the E.U. might once again be shut.
How will the E.U. Commission react? This remains anyone’s guess, but as oil prices keep rising, the Russian leadership is placing its bets that by mid 2010, when gas prices will once again begin to climb, the E.U. will finally throw its full support behind the South Stream and thus doom Ukraine’s most valuable geopolitical asset, it gas pipeline network, to the dustbin. This could also spell the beginning of the end for Ukraine as a fully independent state.
On June 5, 2009, the Ukrainian stated-owned oil and gas concern, Naftohaz Ukrayina, paid Gazprom, the Russian gas monopoly $475 million for gas delivered in May 2009. By beating the June 7th deadline by two days, Naftohaz once again threw a monkey wrench into the propaganda blitz which had been carefully choreographed by Russian Prime Minister Vladimir Putin and Gazprom leadership in order to discredit Ukraine as a reliable transit country in the eyes of the European Union.
Speaking at a meeting of the Ukrainian National Defense and Security Council, Ukrainian President Viktor Yushchenko was uncommonly blunt about the state of affairs at Naftohaz and revealed how the payment was made. “The situation in Naftohaz is critical” Yushchenko stated, “frankly speaking it has never been so severe.” The Ukrainian President stated that Naftohaz owed $157 million for gas which was consumed and almost $500 million for gas placed in underground storage. “I had no choice but to order an emission (of the Ukrainian currency, the hryvnia) and in time the full sum owed Gazprom of 3.8 billion hryvnia will be paid.”
After news of the payment was released, Yushchenko’s advisor for energy matters, Bohdan Sokolovsky demanded that the Russian leadership apologize for their “incorrect and libelous statements about Ukraine’s ability to pay for gas.”
Gazprom officials told Kommersant that at the time the paper went to print they could not confirm receiving a payment, but added that the sum owed Gazprom by Naftohaz was about $640 million.
While the May payment was met before the deadline, Ukrainian officials are worried that this was due to a stopgap measure – a new emission. The average monthly debt to Gazprom is approximately $200 million for consumed gas and $500 million for gas placed into storage.
Come the end of June there remains a real possibility that Ukraine will be unable to pay $700 million for June gas deliveries and this will most likely give Putin the chance to again insist that the E.U. pick up part of the Ukrainian gas tab or else the gas spigot to the E.U. might once again be shut.
How will the E.U. Commission react? This remains anyone’s guess, but as oil prices keep rising, the Russian leadership is placing its bets that by mid 2010, when gas prices will once again begin to climb, the E.U. will finally throw its full support behind the South Stream and thus doom Ukraine’s most valuable geopolitical asset, it gas pipeline network, to the dustbin. This could also spell the beginning of the end for Ukraine as a fully independent state.
Thursday, June 4, 2009
Russian Gas Update
by Roman Kupchinsky
The European Commission will send a delegation of officials to Moscow and Kyiv in order to ascertain the facts surrounding the latest gas-related tensions between the two neighboring countries the website Ukrayinska Pravda reported on June 4, 2009. The delegation comes on the heels of a statement by Russian Prime Minister Vladimir Putin who warned that if Ukraine is unable to pay its gas bills, the transit of Russian gas to Europe could be stopped by the end of June. The delegation’s report will be crucial for the upcoming EU summit to be held in Brussels on June 17-18.
At issue is Ukraine’s May 2009 gas bill which is due on June 7th and Naftohaz’s ability to pay for gas to be placed in underground storage which is shipped to Europe during the fall-winter heating season. These topics were discussed in Moscow on June 2, 2009 during a meeting between Alexei Miller, the CEO of Gazprom and Oleh Dubyna, the head of Naftohaz Ukrayina, but no results of the talks were reported in the media.
The mysterious case of the sale of the Hungarian gas company Emfesz KFT to an unknown company named RosGas based in Zug, Switzerland resurfaced today. The Russian daily Vedomosti reported that Emfesz was sold to RosGas for $1 by its manager, Istvan Goczi who apparently had a power of attorney to do so. Emfesz is owned by Mabofi Holdings which in turn is controlled by Dmytro Firtash, a Ukrainian businessman who owns 45 percent of RosUkrEnergo (RUE). Russia’s Gazprom owns 50 percent of RUE and 5 percent is owned by Firtash’s partner Ivan Fursin. Emfesz supplied about 20 percent of the Hungarian gas market with gas it purchased from RUE. However, in January 2009 RUE was eliminated from the gas supply chain and could no longer supply Emfesz.
When news of the sale was made public, the British-based organization Global Witness conducted an investigation into RosGas in order to determine who stood behind it. According to their report:
The European Commission will send a delegation of officials to Moscow and Kyiv in order to ascertain the facts surrounding the latest gas-related tensions between the two neighboring countries the website Ukrayinska Pravda reported on June 4, 2009. The delegation comes on the heels of a statement by Russian Prime Minister Vladimir Putin who warned that if Ukraine is unable to pay its gas bills, the transit of Russian gas to Europe could be stopped by the end of June. The delegation’s report will be crucial for the upcoming EU summit to be held in Brussels on June 17-18.
At issue is Ukraine’s May 2009 gas bill which is due on June 7th and Naftohaz’s ability to pay for gas to be placed in underground storage which is shipped to Europe during the fall-winter heating season. These topics were discussed in Moscow on June 2, 2009 during a meeting between Alexei Miller, the CEO of Gazprom and Oleh Dubyna, the head of Naftohaz Ukrayina, but no results of the talks were reported in the media.
The mysterious case of the sale of the Hungarian gas company Emfesz KFT to an unknown company named RosGas based in Zug, Switzerland resurfaced today. The Russian daily Vedomosti reported that Emfesz was sold to RosGas for $1 by its manager, Istvan Goczi who apparently had a power of attorney to do so. Emfesz is owned by Mabofi Holdings which in turn is controlled by Dmytro Firtash, a Ukrainian businessman who owns 45 percent of RosUkrEnergo (RUE). Russia’s Gazprom owns 50 percent of RUE and 5 percent is owned by Firtash’s partner Ivan Fursin. Emfesz supplied about 20 percent of the Hungarian gas market with gas it purchased from RUE. However, in January 2009 RUE was eliminated from the gas supply chain and could no longer supply Emfesz.
When news of the sale was made public, the British-based organization Global Witness conducted an investigation into RosGas in order to determine who stood behind it. According to their report:
We have been unable to find the company’s office, but have learned that its correspondence address is that of a mobile phone company in the Swiss tax haven of Zug. There is no evidence to suggest that RosGas AG is currently anything more than a shell company. Curiously, the Hungarian Energy Office (HEO) does not seem to know who owns RosGas AG either, despite having rapidly approved its takeover of Emfesz. The HEO said in an emailed response to questions from Global Witness that: “in the resolution we asked for further information in [the] Hungarian language on the new owner’s owner as the full ownership structure was not transparent enough.” A spokesman added that the HEO was seeking information on the “structure of ‘owners’ tree’”, presumably the chain of ownership of the company. RosGas AG is supposed to provide this information within 45 days of the deal being approved. But even if it does not, there is no suggestion from the HEO that its takeover of Emfesz will be cancelled. Instead, the company will merely face a fine.
Thursday, April 30, 2009
Ukraine Allows Gazprom to Upgrade Its Gas Pipelines
[Photo Credit: Ukrainian Prime Minister Yulia Tymoshenko and Russian Prime Minister Vladimir Putin at the joint press conference. Moscow, April 29, 2009. Photo courtesy of the Cabinet Press Office/ForUm (en.for-ua.com).] On Wednesday, April 29, the Ukrainian Prime Minister Yulia Tymoshenko paid a one-day visit to Moscow to attend the meeting of the Russian-Ukrainian intergovernmental Economic Cooperation Committee and to meet with her counterpart, the Russian Prime Minister Vladimir Putin. As expected, gas transit issues topped the agenda of Tymoshenko's brief but productive visit, which produced a number of important results.
Chief among them is Moscow's pledge not to fine Ukraine for failing to purchase 40 billion cubic meters of gas from Russia in 2009 in accordance with the bilateral contracts signed on January 19. The relevant provisions of those contracts stipulate that Ukraine is obliged to pay for the aforementioned amount even if Kyiv decides not to purchase all of it. However, the global economic downturn forced Ukraine to scale down its gas consumption thereby violating its contractual obligations vis-à-vis Russia's Gazprom in the first quarter of 2009.
In exchange, Tymoshenko invited Russia to participate in the EU-led overhaul of Ukraine's gas transportation system. It should be recalled here that the EU-Ukraine declaration on the modernization of Ukrainian gas transit system, which was signed in March, stung Moscow because it excluded Russia. During the joint press conference with Putin, which followed the six-hour talks, Tymoshenko stated, "I think everyone understands that it is impossible to modernize the gas transport system without Russia's participation. We have invited Russia to be a key player in the modernization of our gas transport system."
Ukraine's two other relatively less important concessions to Russia ought to be mentioned as well. Tymoshenko expressed Ukraine's commitment to assisting Russia with its accession to the World Trade Organization. In addition, she assured Moscow that Ukraine does not supply Georgia with weapons and does not intend to do so in the foreseeable future. In the aftermath of the Russia-Georgia war of August 2008, the issue of Ukrainian weapons deliveries to Georgia has been a major irritant in bilateral relations.
The Ukrainian experts praised Tymoshenko's visit to Moscow. Jamestown analyst and Ukraine expert Roman Kupchinsky told the Jamestown Foundation Blog that it must be made clear that Tymoshenko did not give Russia any ownership rights over the Ukrainian gas transport system. The decision to grant Gazprom the right to participate in the modernization of Ukrainian gas transport system Kupchinsky interprets both as a pragmatic step in placating Russia and a reasonable measure to lower the overcharged rhetoric in the area of Ukrainian-Russian energy relations.
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