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“Ukrainian Front” and Problem of Gas Supplies to Europe

“Ukrainian Front” and Problem of Gas Supplies to Europe

We have entered the year 2010 without “gas war” with Ukraine. Yet, neither this fact nor the completion of the presidential election campaign coupled with Viktor Yushchenko’s retirement as president makes the situation stable and predictable.

Another episode of the Ukrainian political “docusoap” is beginning and it is going to seriously influence both the problem of gas transit via this country and natural gas supplies to its domestic market.

The long-lasting systemic and personal political crisis in Ukraine is one of the major risk factors for Russian gas deliveries to Europe. No wonder that the major suspension in Gazprom’s supplies happened on this route. But the Ukrainian market and its gas transportation system are potentially interesting objects both for corporations and mediatory organizations to manage and generate profits.

Moreover, in the medium-term perspective there will be no real alternative to ensuring fuel transit from Russia to the EU, which makes the interested sides work out tactics and strategy of cooperation regardless of political conjuncture hedging political risks by technical, diplomatic, commercial and PR methods

The report offers an in-depth discussion of the following subjects:

  • The new president’s views on the future of gas relations

    • Future changes in the Ukrainian government and new gas and political conflict lines
  • The fate of Russian-Ukrainian gas contracts

    • Vitality of the "January 19th system" and results of its first year of functioning. Main weak points.
  • The Ukrainian gas market: infrastructure and economy

    • The consumption and distribution system
    • Pricing and the network’s technical condition
  • Upcoming bankruptcy of Naftogas

    • The economic crisis in Ukraine and the problem of gas payments
    • Managerial and financial collapse of Naftogas
  • Positions of Russia and the EU. Prospects of a gas transportation consortium

    • Modernization Declaration and Eastern Partnership
    • Prospects of applying European rules of access to the gas infrastructure in Ukraine
    • Position of the EU’s new leadership
  • Forecast of developments


  • The new president and a new course


  • Prospects of reforming the Ukrainian gas market

  • New battles within the Russia-EU-Ukraine “gas triangle”


The contents of the report:

Introduction 2
Chapter 1. System of Gas Transit and Supplies to Ukraine: Open Circuit 4
1.1. Development of Relations. Turkmen Problem 4
1.2. First Gas War and January 4, 2006  Agreement 7
1.3. Second Gas War, New Contractual System of January 19, 2009 10
Chapter 2. Ukrainian Gas Market: Infrastructure and Economy 13
2.1. Production 13
2.2. Gas Transportation System and Underground Gas Storage Facilities 16
2.3. Consumer Market Structure and Gas Marketing 19
2.4. Gas Distributing Organizations and Attempts to Consolidate Them 22
2.5. Pricing on Domestic Gas Market 24
Chapter 3. Problem of Payments for Russian Gas. Upcoming Bankruptcy of Naftogaz 26
3.1. New Pricing and Tariff Formula 27
3.2. Naftogaz’s Tax Burden 31
3.3. Managerial and Financial Collapse of Naftogaz. Credit Tsunami 32
Chapter 4. Between Russia and Europe 35
4.1. Gas Transportation Consortium and Pipelines Bypassing Ukraine 35
4.2. Modernization Declaration and Eastern Partnership 37
4.3. Russian-European Deadlock Through Ukrainian Lenses 40
4.3. Credit PR 41
Chapter 5. Forecast of Developments 43
5.1. Elections. Results and Perspectives of Formation of New Coalition 43
5.2. Gas Relations with Russia. Reanimation of Consortium for Managing GTS 45
Date of issue February 27, 2010

If you are interested to obtain please contact » Elena Kim

Other issues:
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Analytical series “The Fuel and Energy Complex of Russia”:

New OPEC+ Deal and Future of Oil Business in Russia
Gazprom on the background of external and internal challenges
Regulation of Oil and Gas Sector in 2019 and Prospects for 2020
Fiscal Policy on Oil and Gas Sector: Revised as Often as Wikipedia
The tax system in the oil and gas sector continues to undergo radical changes. The beginning of 2019 saw the introduction of a new tax regime: additional income tax. That experiment was supposed to start migration of the oil industry to an innovative principle of taxation: on profit, not revenue. It seemed that a new main road was found. In the same year, however, the Finance Ministry launched an overt offensive against AIT. The fear of loss of government revenue now is more powerful than the threat of causing oil production to collapse in the medium term because of a tax system that does not stimulate investment. The Finance Ministry would strongly prefer to speed up the tax manoeuvre completion that earns the state budget additional money. Oil and gas companies respond to this with individual lobbying, attempting to wangle special treatment for their projects.
Ukrainian Gas Hub: Climax at Hand
The “zero hour” comes in less than a month: the contracts for gas transit through Ukraine and for supplying Russian gas to the country terminate at 10 am on 1 January. Meanwhile, Gazprom and Naftogaz are very far from looking for a mutually acceptable solution. The entire European gas business is watching intently the negotiations between Russia and Ukraine. Everyone is waiting for a new “gas war”: the January 2009 events proved to be a serious test both to European consumers and to Gazprom as a supplier. Is there still a chance of agreement? If there is not, will Gazprom cope with its obligations to deliver gas to Europe? Is Russia bluffing as it assures that the new infrastructure and gas in underground storage facilities will enable it to get by without Ukrainian transit even as soon as this winter? What will happen to Ukraine itself at the beginning of 2020?

All reports for: 2015 , 14 , 13 , 12 , 11 , 10 , 09 , 08 , 07

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