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The stakes of the gas crisis

Latest update : 2008-03-09

The ongoing gas crisis pitting Russia against the Ukraine is a match for 'control of the Ukrainian pipeline network,' explains La Croix’s world affairs deputy editor Alain Guillemoles.

Ukraine and Gazprom have been locked in a struggle over gas since 2006. According to La Croix’s world affairs deputy editor Alain Guillemoles, the wrestling match between Russia and Ukraine will have direct implications for “control of the Ukrainian pipeline network”.

Gazprom has resumed gas deliveries to Ukraine after slashing them twice last week. What is at stake in the unrest over gas? Will the European Union have to face unexpected consequences if the crisis worsens further?  Author of ‘Gazprom, the new empire’, Alain Guillemoles brings some answers.

How would you explain the arm wrestle between Russia and Ukraine over the issue of gas?

That’s a long story, with a troublesome episode involving a messed-up divorce. Russia just couldn’t accept Ukraine’s breakaway and independence. Gas supplies are a powerful pressure instrument.
Ukraine depends entirely on Russia for its supplies of gas, and the Ukrainians are big energy consumers, mainly because of the poor insulation of their homes and their wide-range steel industry.
However, Russia itself is heavily dependent on Ukraine because 95% of its exports go through the country, on their way to Europe, the sole destination for Gazprom’s gas. Exports to China haven’t been launched yet.     
Gazprom has therefore been maneuvering for years to seize full control of Ukraine’s pipelines and the Russians are determined to use the political crisis between President Viktor Yushchenko and his Prime Minister Yulia Tymochenko to reach their goal.

Vladimir Putin and President Viktor Yushchenko came to an initial agreement on February 12, foreseeing a payment of the $600 million Ukrainian debt and a simplified delivery network. Is the deal moving forward?

What is at stake is control of the Ukrainian pipeline network rather than the country’s debt. Discussions over the Ukrainian corridor will therefore resume, but there are two main sticking points. Negotiators will discuss the transit fee Russians are to pay Ukraine and the role of RosUkrEnergo, the exclusive agent of gas transit, which has been quite evasive regarding its profit redistribution policy. Tymochenko wishes to dump RosUkrEnergo, Gazprom management is divided on the issue and Medvedev is inclined to pull it out of the system – but will he?

Is there a risk that EU countries will suffer new cutbacks because of this crisis as they did in January 2006?

There is no doubt that the risk is still there for the EU because the confrontation is so rough between Russia and Ukraine.
If restrictions had lasted longer in 2006, Ukraine would have been forced to request Europe’s assistance and the crisis would have taken an international spin.
Furthermore, Europe lacks a genuine power policy since certain countries favour their national guidelines rather than European goals. If the EU does not take action, Russia may impose its rules on the European market. Eyes are now turning towards France to watch how it will lead the issue during its European presidency in the second semester of 2008. Indeed, Paris pledged to make energy issues a clear priority.               

Date created : 2008-03-08