Financial Times: Ukraine tries to wrestle Russia over South Stream gas pipeline
Thursday will be a crucial day for Ukraine. Its parliament will attempt
to adopt a package of bills needed to secure the next tranche of an IMF bail-out loan.
Equally important will be a separate bill to allow the creation of a joint venture
between EU and US companies to operate Ukraine’s gas transportation system.
That would strike a blow at Russia’s South Stream project. But what are
Parliament refused to support either bill last week after the collapse
of the pro-western governing coalition. The refusal infuriateddArseniy Yatseniuk, the
prime minister, who threatenedto resign.
But it seems Yatseniuk has decided to make one more attempt. On Monday
he said the cabinet would re-submit the bills to parliament.
He told reporters:
“First, we need to hold an extraordinary session of the parliament.
Second, all members of parliament must attend. Thirdl members of the parliament must
participate in the voting for all of the bills submitted by the government… The approval
of a decision on Ukraine’s gas transportation system is a key issue that should be on the
agenda of the country.”
According to the bill, 51 per cent of the Ukraine’s gas transportation
system should be controlled by the state, while 49 per cent could be held by western
firms. Yatseniuk said this scheme would help to prevent the construction of Russia’s
South Stream gas pipeline under the Black Sea, which bypasses the territory of
Last Friday night, Yatseniuk emotionally explained the details of the
government’s plan on the television talk-show Shuster-Live. “Russia wants to bypass
Ukraine and turn us off as a transit country. And we will pump air through the Ukrainian
gas transportation system… We need the Americans and Europeans who can fund the upgrading
of our gas transportation system; they will buy gas from our system; and not allow Russia
to build South Stream,” he said.
Alexander Paraschiy, head of research at Kyiv-based Concorde Capital,
tells beyondbrics that the Ukrainian government is offering western companies dividends
from the profits of the country’s gas transportation system and, therefore, that they
would have an interest in maximizing this profit. “This maximization is only possible in
the absence of South Stream, an alternative gas pipeline which would reduce the amount of
gas pumped through Ukraine up to two-three times,” Paraschiy says.
“Thus, the Ukrainian authorities are proposing to western companies that
they invest in Ukraine’s gas transportation system, which is already in existence and
gives good profit, instead of investing in an alternative project with a long payback
period,” he adds.
On Monday, Yatseniuk said any companies wanting to join a joint venture
would have to be approved parliament.
Mikhail Gonchar, president of the Centre for Global Studies Strategy
XXI, a Kiev-based think-tank, says the offer could be attractive to western companies if
Ukraine’s gas transportation system were transformed from a part of the former Soviet
Union’s network into a part of the gas supply system at the eastern borders of the EU. He
notes that Ukraine joined the European Energy Community in 2011 as the first step in the
country’s gas system transformation to European standards.
“However, it doesn’t mean that as soon as the bill has been adopted, a
consortium with the participation of EU and US companies will be created. That is a
matter of a more distant future,” he said.