Gas conflict between Ukraine and Russia: An energy threat for Europe?

For a long time, Ukraine and Russia met gas conflicts. These rows increased because of arbitrary fixation of gas price by Russia, the late of Ukrainian’s payment and recently, the politic crisis in Crimea.

Source:en-wikipedia.org

Singular Link and the rate of energy independence on Europe
Before Crimea’s independence, Russia had a lease to use this peninsula for its affairs. However, it wanted to totally take back its military installations and develop its gas energy because this peninsula has important pipelines. Russia has been the gas supplier for the European Union for a long time.

 
Europe depend on it: Germany and West countries for 24 % whereas France and UK for 6 % ( France is supplied mainly by Norway). Ukraine is an important transit and supplies country between Russia and Europe, so Russia tries to keep good relationships with it. Moreover, the gas is a source of conflicts.

 
3 energy crisis: a financial disagreement between both countries

On January 2006, Russia switched off the gas supply in Ukraine because they didn’t manage to find an agreement. Russia aimed to create its proper market of gas and it wanted to increase the gas price from 50 dollars to 230 dollars per 1000 cubic meters. The causes of this conflict were that Ukraine bought gas from Rosukrenergo, a Swiss registered company. This gas was coming from Turkmenistan, Ukraine denied it but Russia considered this as a breach of their agreement. There were other politic consequences as Ukraine’s integration to NATO. Europe put pressure on Russia and estimated 30 per cent their energy droops. They decided to ensure gas storage and shared it in case of emergency. Indeed, they developed their own energy by building other nuclear power stations.

 
On January 2009, both countries couldn’t reach to an agreement because Russia aimed to double the gas price. This new row was provoked by the failure of fixing the price of gas transit imposed to Russia and the disagreement about the payments of Naftogaz bills. First, Russia wanted to pay 2 billion dollars whereas Ukraine wanted to spread out its payments: 1.6 billion dollars and later 450 million dollars.

 
On June 2014, Russia decided to turn off its gas store to Ukraine because it didn’t pay its gas bills. Indeed, Ukraine owed 4.5 billion dollars of bills but it had to pay 1.95 billion dollars immediately. Today, if Ukraine wants its gas supply, it should pay upfront. Furthermore, this gas row isn’t only about unpaid bills: When Kiev’s new government reversed its former president, Europe provided a temporary change of customs on its exports to Europe, a help of 1.6 billion euros and the cut off gas’s dependence to Russia. This action aroused Russia’s anger and it increased Ukraine’s gas price. Finally, both countries faced trial against each other at the Stockholm arbitration institute.

 

Europe and Ukraine have built reserves in order to prevent energy blackout. Finally, they signed an agreement for 10 years. Moreover, they continue to elaborate preventive measures like gas storage stocks, importation of natural liquid gas from closer European countries and energy islands.

 

The signature of a temporary agreement: the insurance of energy supply

 

On the 26 September 2014, the former energy commissioner, Gunther Oettinger proposed an interim agreement between both countries in order to ensure gas supplies in Europe until spring 2015. This proposal disposes that:
-Ukraine will have to pay 2 billion at the end of October and 1.1 billion at the end of 2014.
– 2 societies, Gazprom and Naftogaz ensure to provide a sufficient gas power to Europe and increase this power if it’s not enough.

 
This agreement was signed at the end of October by different parties and validated until March 2015. The gas price will be steady all along this contract, it is estimated to 385 dollars per 1000 cubic meters. It completes their former gas supply contract and maintains their relationship until the decision of the international arbitration court in 2015.

Because of these conflicts, Gazprom lost 53 % of its export revenues in 2013. In order to stay a reliable gas supplier, it invested in country’s oil, gas sectors and found alternative energy resources. In May, Russia signed a gas supply deal with China in order to face Europe’s economic sanctions. Indeed, it gave up the construction of South Stream because this project didn’t respond energy policy of the EU. Also, Russia can’t stand European economic sanctions because of different conflicts with Ukraine. It tries to win other foreign markets and aimed at building a gas pipeline in Turkish, named Turkish Stream. A gas hub sat up to European Consumers and Europe should build its own transport equipment in order to benefit this gas supply.

Europe seems to have guarantees in order to avoid energy blackout. But recently, Russia has threathened Ukraine again to cut off its gas supplies. In fact, Ukraine denied to pay its, provided to the east territories, occupied by pro russian separatists. In order to justify its refusal, Ukraine showed that there weren’t control of gas’s quantities and consumptions on the east territories. Indeed, it affirmed that Russia reduced of half gas supplies. Out of this conflict with both countries, this new threat seemed to denounce the project of Energy Union, presented by UE. It translates Europe’ s expectations to reduce energy dependance close to Russia, diversify its energy resources and reinforce links with supplier countries as Norway, Azerbaidjan or Turkemenistan. Finally, on Monday, they found an agreement in order to ensure gas supplies until the end of march.

Russia’s threats seemed to have no limits or end. We could run into other upheavals these upcoming months.

Sources:

http://www.vox.com/cards/ukraine-everything-you-need-to-know/what-is-the-ukraine-crisis
http://europa.eu/rapid/press-release_STATEMENT-14-287_en.htm
http://www.bbc.com/news/world-europe-26987082
http://news.bbc.co.uk/2/hi/business/4569846.stm
http://news.bbc.co.uk/2/hi/europe/7240462.stm
http://www.nato.int
http://fr.sputniknews.com

http://www.lemonde.fr/europe/article/2015/02/26/moscou-fait-a-nouveau-monter-la-pression-sur-le-gaz-ukrainien_4583373_3214.html

 

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