Putin Tells EU: There’s No Free Ukrainian Gas

On 17 April, Russian President Vladimir Putin said that transit via Ukraine is the most dangerous element in Europe’s gas supply system. At the same time, the Kremlin leader said it would not be possible for Europe to stop buying Russian gas and that he was hopeful a deal could be reached with Ukraine on gas supply.

In a televised call-in with the nation on 17 April, Putin said Gazprom sells “gas in European countries which have around 30-35% of their gas balance covered by supplies from Russia. Can they stop buying Russian gas? In my opinion it is impossible,” he said.

Putin also warned that Gazprom will switch to a pre-payment system in one month if Ukraine doesn’t start paying for natural gas imports from Russia.

“We could do it today, but we will wait another month,” Putin said about implementing a pre-payment system for Ukraine. In March, Ukraine didn’t pay a dollar of its $525 million gas bill, Putin said.

“In accordance with the contracts, we will start pre-payment in one month. They will pay in advance and we will give them as much as they pay for.”

Following Putin’s televised call-in Konstantin Simonov, head of Russia's National Energy Security Fund (NESF) in Moscow, told New Europe on 17 April that Putin is insisting that the EU should bail out the pro-European Ukrainian government. “I think there is only one solution: Europe must find $2.2 billion and give it to Mr Putin - to Gazprom,” Simonov said. "It's a problem of Europe and Russia will not give this gas free of charge to Ukraine."

Simonov warned that if Russia stops gas supplies to Ukraine on 1 June, the former Soviet republic will have no time to fill its underground gas storage facilities for future winter consumption, to ensure uninterrupted transit of Russian fuel to Europe.

“In winter, Ukraine is taking gas from Russia in eastern border of Ukraine and uses the gas in underground storage to give to Europe. It means that if there will be gas in underground storage, there will be no gas for Europe but Ukraine will take the gas from Russia in the eastern part of Ukraine,” Simonov said. “For such countries as Bulgaria, Bosnia, Serbia, Slovakia, Slovenia the situation is really very dangerous,” he said, adding that some of these countries rely on Russia for over 90% of their gas.

Meanwhile, European Commission President Jose Manuel Barroso said the European Union is willing to hold talks with Russia and Ukraine on gas security.

In a reply to a letter from Russian President Vladimir Putin in which he warned of gas supply disruption, Barroso said the EU believes that “this approach allows for the most useful process with the Russian Federation and other third parties”.

Before taking any measures linked to Russian gas supply to Ukraine all the parties concerned should use a mechanism of early warning, Barroso said, reminding of a similar mechanism that was coordinated by the EU and the Russian Federation after the 2009 gas war and which was modernised in 2011. Barroso pointed out that in case of emergency this mechanism should be activated before taking any unilateral steps.

Putin warned EU leaders a week ago that Russia would cut natural gas supplies to Ukraine if it did not pay its bills and said this could lead to a reduction of onward deliveries to Europe.

During the 12th annual question and answer session on 17 April, Putin also said that Russia will widen co-operation with China, while not seeking to form a military bloc with its neighbor. Russia and China are “natural neighbours and therefore natural partners,” Putin said.

The crisis in Ukraine has increased the importance of Russia’s relationship with China. Putin is due to meet Chinese President Xi Jinping in Beijing in May to discuss bilateral issues including a potential gas-supply deal.

Moscow and Beijing have been involved in long talks about possible Russian gas supplies to China, with price being the main obstacle to a deal. “I’m absolutely sure that they will sign this contract in May,” Simonov told New Europe. “Gazprom can give some maybe discount. It will be maybe a little bit less than European price but it will be adoptable price,” he added.

“For Gazprom now there is no other alternative but to sign this contract. This contract is very important now for Gazprom,” Simonov said, adding that for China it is also a very good solution. He noted that Australian liquefied natural gas (LNG) now is more expensive than it was expected by the Chinese so they also have no flexibility.

Putin has urged Russian companies to expand their exposure to Asia as European countries seek less dependence on energy supplies from Russia.

“Our relations with China are developing quite successfully and are at an unprecedentedly high level of trust and co-operation,” Putin said on 17 April. “China will be the world’s No. 1 power eventually. That can be considered a hard fact.”

By Kostis Geropoulos

New Europe, Fpril 17, 2014