This week, Bloomberg reported that Russian energy giant Gazprom was planning to resume and maintain exports to Ukraine for at least three more years, although Kiev halted natural gas purchases from Russia in November and vowed to cut its energy reliance on Russian gas. However, the degree of Ukraine’s “gas independence” on Russia is overestimated, Valdai Club experts Alexei Grivach and Danila Bochkarev believe.
The Gazprom document obtained by Bloomberg does not contain any sensation, believes Alexei Grivach, deputy director of the National Energy Security Fund. "This is nothing more than a budget plan, which is annually drawn up a three-year term”, the expert said.
“The figures from this document are only a theoretical assessment of Ukraine’s ability to consume gas, assessment based on previous consumption periods. These data do not mean that Ukraine will actually buy gas to that extent," he elaborated.
Gazprom’s contract with the Ukrainian energy company Naftogaz envisages that Kiev has to buy 42 billion cubic meters of gas a year based on the "take-or-pay" principle. Ukraine does not comply with these obligations, Grivach said, adding that sometimes Gazprom makes concessions to Naftogaz and its European partners by “cancelling these ‘take-or-pay’ rule", although this is rather an exception. "For example, in the third quarter of last year the rule was in place and Ukraine was presented a bill for not buying the proper amount of gas. The year before, the same thing happened at the end of the summer season", the expert explained.
Consumption of Russian gas in Ukraine has dwindled, but this is not the result of more energy efficiency, believes Danila Bochkarev, a Brussels-based fellow with East-West Institute's Regional Security Initiative team. "Ukraine significantly lowered temperature standards in households, while industrial gas consumption dropped due to the economic downturn," he explained.
He was echoed by Alexei Grivach who said that reduced demand for Russian gas cannot be considered a success of the Ukrainian politicians. "It is only politicking. This energy "independence" has been achieved at a considerable cost. Three- or fivefold increase in gas prices for public utilities made gas unaffordable as a means of providing heat and hot water for the majority of population. It is also the collapse of the economy and decline in industrial production. And finally, this is denial to provide gas to the Donetsk and Lugansk regions,” he said.
The gas bought by Ukraine from the EU is in fact Russian, Grivach said. "Ukraine buys gas from Gazprom indirectly, but this is Gazprom’s gas purchased from European traders at higher prices,” he explained.
However, by acting in such a roundabout way Ukraine demonstrates its acceptance of the European gas market rules. The country violates its obligations to Moscow, focusing instead on the EU interests and, by not buying gas from Russia, it gives money to Europe. "In this case we can say that Ukraine has achieved a certain success," said Bochkarev, adding, however, that sometimes there is simply no way to avoid direct contact with the Russian gas giant. “The advantage of Gazprom is that it can provide the customer with an amount of gas three times higher than usual if needed. Not every company is capable of doing this," he said.
Both experts agree that it is too early to talk seriously about Ukraine’s energy independence from Russia. "We cannot say that either Russia or Ukraine has achieved their goals – to get rid of the Ukrainian transit and achieve independence from Russian gas supplies respectively. Transit problems are solved only partially. And ‘independence’ was only achieved thanks to a relatively warm winter, lowering heating standards and collapse of the industry," Bochkarev concluded.