"It is very possible that transit of Russian gas through Ukraine may be interrupted"

Natural Gas Europe had the pleasure to conduct a "gas talk" with Aleksei Grivach, Deputy Director National Energy Security Fund of Russia.

Topics touched upon revolve upon the current state of affairs between the EU and Gazprom, as well as, the Ukrainian crisis and the potential aftermath for the European markets. The diversification aspect of the EU policy was also discussed, along with the hurdles and opportunities associated with the South Stream pipeline project.

Over the past period, there has been a lot of talk and culminations on multiple levels in the EU regarding the progress of the South Stream pipeline project. In your view what are the challenges for the countries involved, such as Bulgaria and what can be done to overcome them?

The main challenge for the countries involved in the South Stream project is very high level of political pressure directed upon them by Brussels and Washington. There is no doubt that this project is in full compliance with European energy security issues and is of vital importance for some countries of the EU including Bulgaria ,which are highly dependent from gas transit through Ukraine. From this point of view South Stream is of great benefit for EU because best part of financial and market volatility risks Russia is going to take up. Problems are only on political side. So finally we hope that mind and economic reasons would win the situation.

The situation in Ukraine is carefully observed by policy makers in the Balkans due to fears that gas supplies may be interrupted in the 2014-2015 winter period. Do you find these assumptions as valid?

It is very possible that transit of Russian gas through Ukraine may be interrupted. Recent declarations made in Kiev that they are going to implement sanctions against Russian business activities and stop the transit of resources and particularly natural gas shipping across Ukrainian territory is a very clear signal that risk is in place and it may materialize even sooner.

On the other hand Ukraine faces very hard times in terms of economical stability. They failed to pay for about 11 BCM of gas imported from Russia since the end of last year, the debt is about $5 billion. Gazprom had to stop deliveries of gas to state company Naftogaz Ukraine and Kiev doesn’t have enough gas to survive during coming winter. So taking gas from the transit amount by Ukraine, stealing it could happen even if the sanctions against Gazprom would not be implemented.

One of the most urgent priorities of countries such as Greece, Bulgaria and Serbia, has been the introduction of foreign direct investments on the energy sphere. Can you estimate if and how Russian entities can be a part of that, especially in the natural gas sector?

South Stream is a great example of such investments. Onshore construction in Europe costs about 7 billion euros based on preliminary data. Half is for Bulgarian part, and quarter is for Serbian one. Greece is not involved as the southern route was finally closed. There was a bid from Gazprom to buy Greek gas trading company DEPA, but the government failed to give guaranties to the buyer that the deal would be confirmed by the European Commission.

How do you view the overall EU gas policy as of late taking into account the "Third Energy package", the legal row between Brussels and Gazprom, as well as, reverse gas flows to Ukraine and efforts to manage its domestic pipeline system by a EU-US consortium?

After the adoption of Third Energy Package, new gas infrastructure projects are feasible only under exemptions given from the regulation authorities to the investors. So the rules are not investor friendly and issuing of exemptions by the EU is not the firm obligation. As we have the situation with onshore of North European Gas Pipeline – OPAL in Germany. First the project got full exemption but during the construction EC changed its decision and restricted 50% of transit capacity. As a result pipeline is underutilization of the pipe and generating losses for Gazprom and its partners.

That’s why Russia is proposing to conclude special agreement between Russia and EU about using trans-border infrastructure between us. But Brussels is not ready for mutually beneficiary compromise.

Lastly I would like to ask you if you believe that the EU is sincere in its stated efforts to "diversify" from its reliance to Russian gas (and energy) and especially in the geographical region of Southeastern Europe, bearing in mind projects such as TANAP-TAP.

Diversification is a good idea. It increases security of supply. And we don’t have any problems with fair competition to other suppliers. We have gas, we are flexible and competitive, reliable partners with perfect track-record in supplying European customers for decades. We have problems with transit country but we have will and ability to solve this inconvenience with our European partners. There is a proverb in Russia - one old friend is better than two new ones.

New Europe, August 18, 2014