Blackmailing the intractable, or Is Putin right?

Russia’s President Vladimir Putin held a press conference, where he gave very frank answers to questions on the issue of cooperation with Ukraine.

He said among other things that Ukraine had made a strategic mistake when it refused to lease out its gas transportation system. His main argument is that the completion of the bypassing Russian gas pipelines will make the existence of Ukrainian GTS virtually pointless. “We proposed leasing Ukraine’s GTS together with Europeans, without violating Ukrainian law, without changing proprietorship, leaving it in possession of the Ukrainian state. We proposed taking it on lease, simultaneously undertaking the obligation to develop and load the Ukrainian GTS,” summarized his good intentions Putin as quoted by UNIAN. However, one needs not to be an expert on international law to immediately see a question here: can Europe and Russia indeed jointly manage the gas transport system, given that their approaches to gas policy are not quite identical (and this is just an understatement)? In the EU the essence of gas policy is manifested by the adoption of the Third Energy Package, which Russia is trying to circumvent by hook or by crook. On the other hand, Putin is basically right. When, at a certain moment, Ukraine did not complete the matter of the trilateral consortium on the GTS management (the new gas regulations were not in effect in the EU back then), it was its mistake. The “Pipe” has international strategic importance, and due to objective reasons Ukraine cannot afford managing it on its own. The GTS makes profit only if it is used at full capacity. So for the Ukrainian budget to maintain this gas machine on its own is unaffordable.

Next, Russia’s president addressed the question of Ukraine’s joining the Customs Union. At present, Ukraine’s membership is not on the table since Ukraine has not yet formally applied, says Putin. But he hinted that Ukraine is having more and more trouble solving its economic issues (in plain words, selling its products), related to working on the Customs Union market. In particular, he reminded the irksome question of issuing quotas for exporting Ukraine’s pipes to Russia. “We withhold Ukraine’s quotas not because we will not grant them, but because this is the competence of supranational authorities [within the framework of the Customs Union. – Author]. Our Ukrainian colleagues believed to a certain moment that we were joking. But then they realized there was no joke,” said Putin as quoted by UNIAN.

The Day asked Valerii Muntiian, government commissioner on cooperation with the Russian Federation and CIS states, to comment on the Russian president’s statement. Does it mean that Ukraine will be able to get a quota on exporting its pipes to Russia on condition of joining the Customs Union? Muntiian refused to answer this question, citing his being unauthorized to comment on anything said by a foreign head of state. However, he said the following: “At present we have developed a set of directives which are now getting approved. An authorized delegation is now leaving for Russia. We are starting negotiations on Monday.” These negotiations, says Muntiian, will be held with the Customs Union’s coordinating authority, the Eurasian Economic Commission. He also reminded that Ukraine and the Customs Union have signed two memorandums: one on cooperation and trade, the other on technical regulations, but refused to share more details concerning the talks scheduled for next week.

Now, let us come back to Russia’s declarations. Curiously, the next public speech made by the Russian head of state virtually coincided in time with the cancellation of president Viktor Yanukovych’s official visit to Moscow (which had been scheduled for December 21). The Day’s source close to the negotiating parties shared that the summit was supposed to result in Ukraine’s consent to lease out its gas pipeline to Russia. However, says the source, when the Ukrainian negotiators were on the point of returning home, another demand was put forward in confidence: the release of Yulia Tymoshenko. Under such conditions, the meeting was impossible, summarized the source. There is no formal confirmation of such a confidential demand. Yet the frank statements, made recently by the Russian leader in reference to two issues crucial to Ukraine-Russia cooperation, point to a conflict of interests which most likely arose at the very last moment.

Well, the tone of the discussion, set by the Kremlin, comes as no surprise. This is not the first (and most likely, not the last) instance of such diplomatic rhetoric, which is increasingly more and more like political blackmailing of the intractable (due to various reasons, which very often remain behind the scene of the political debate) Ukraine.

By Natalia BILOUSOVA, The Day

Bohdan SOKOLOVSKY, former commissioner of the president of Ukraine in matters of international issues of energy security:

“Putin has revealed something which had long been common knowledge. He acknowledged that the high gas price is Russia’s tool for pressuring Ukraine. And Russia will never yield what it once gained.

“As far as the GTS goes, it must not be leased out or concessioned. In a word, no one must get access to our pipeline, because our GTS has a twofold function. Its first and main function is supplying gas to the domestic consumer. No normal country would ever allow a foreign state to interfere. Meanwhile, this is what Putin is trying to coax Ukraine into. The transit function of our GTS is of secondary importance only. This is where we earn 1.5 billion dollars per year. This is a negligible sum, compared to the importance of the entire project. For a big country like Ukraine this money is definitely not worth agreeing to the terms forced on us by the Russian Federation.

“By the way, this was the first time I had heard of lease, moreover, with Europe’s participation. They gave up this option long ago (under Leonid Kuchma’s presidency). It is obvious that Putin means the same idea he has cherished: getting free access to Ukraine’s gas pipeline.

“As for bypassing gas lines, they are nothing but cheap blackmailing, and we should not rise to that bait. Yes, the South Stream was constructed as an alternative to Ukraine’s GTS. But we have to wait and see it work. The world has never had an experience of laying a pipeline so deep, let alone using them. On the other hand, the North Stream was designed primarily with a view to developing the North Sea deposits which, by the by, are not developed yet. Obviously, the Western partners are pressuring the Russians, demanding to fill the pipe, otherwise it is impossible to break even. This is why Gazprom is forced to re-orient its gas transportation to the North Stream at a loss – and they are making a loss, I reiterate.

“Meanwhile, our pipeline will never remain empty. It will always transport gas to the domestic consumer. Secondly, our reservoirs will always be wanted – by the West, first of all. Europe is not as wasteful as Russia. In Europe, they take care of every penny.”

Mykhailo HONCHAR, director for energy programs at Nomos Center, Kyiv:

“Firstly, Russia’s attempts to shift responsibility on the Customs Union Commission, which allegedly is responsible for granting Ukraine quotas for its pipe products, look ridiculous. It is common knowledge that the Customs Union Commission is dominated by Russia. Basically, it is just the same player in a different disguise. Secondly, Russia wants to use this policy for activating and stimulating the ‘metallurgy’ group in Ukraine’s oligarchy to champion Russia’s interests in getting Ukraine involved in the Customs Union. For this, Russia uses personal and corporative incentives. If you fail to pressure your government to join the Customs Union, we are not buying your pipes. If you succeed, we will jointly bring Ukraine to the Union, and your comfortable existence will continue.

“Failing to coerce the Ukrainian delegates to sign the documents (in Russia’s version) on Ukraine’s joining the Union on December 18, the Kremlin will probably shift from direct pressure to indirect. But there will be no loosening the pressure.

“As for the gas theme, brought up by Putin, everything there is also twisted. Speaking of the gas crises of 2006 and 2009, which allegedly prompted Russia’s bypass projects, one must remind that it was nothing other than Putin’s very own Energy Strategy of 2003 provided for building transit-free gas transportation systems. That is to say, the policy was coherent with Russia’s geostrategic interests, making it independent of transit countries. Not exclusively Ukraine, but Ukraine first of all. The Russians are very consistent in implementing this policy.

“Secondly, it is Russia that is responsible for the frustration of the trilateral consortium involving a European, Russian, and Ukrainian partner in 2002. After the signing of the Saint-Petersburg declaration by Kuchma, Putin, and Schroeder, no one else but Russia (represented by Gazprom) proposed to the Ukrainian party to agree all issues in the bilateral format, and only then involve the Germans. The company, labeled Consortium on GTS Management, was created and registered, and it has hitherto existed only in bilateral format. That means that Russia has always tried to keep Europe as far as possible from the consortium and eventually create it in the bilateral format, where it would take the lead, effectively reducing Ukrainian influence to naught.

“And no one other but Russia refused, and still refuses, to guarantee transit volumes transported via Ukraine. It did not do that back in 2002-03, when the initial version of the consortium was being discussed, or in 2009, when the ill-starred transit contract was signed, with only an indicative figure of 110 billion cubic meters of transit gas via Ukraine’s GTS per year was fixed. Nowhere the principle ‘transport or pay’ is formally stated. These are typical examples of Putin-style propaganda, which uses the Goebbelsian approach: the bigger the lie, the easier people believe it.

“As far as the construction of Russia’s bypass pipelines goes, of course this does not help Ukraine one bit. But Gazprom, and Russia as a whole, will eventually suffer losses from the implementation of these excessive and useless projects. The competitiveness of Russian gas in the European market will be lower due to excessive transportation facilities, which increase maintenance costs. Russian gas will thus be less competitive than Norwegian or North African gas, and in future even than North American gas, when it will appear on the European market in the liquefied form. Therefore, Russia is digging its own economic grave.”

What should Ukraine’s government, for whom the access to the Ukrainian GTS is vital, do in this situation?

“What it should have done four years ago: implement the Brussels declaration on the modernization of its GTS, together with the EU. Recently Brussels again expressed its willingness to continue the cooperation in this sphere. The only thing missing is the activity on Ukraine’s part. If this has not been so far realized, the blame should go to today’s leaders, who in 2009 were in opposition and declared that without Russia, we had no right to take any steps in this direction. Now, almost three years of experience shows that there is nowhere Ukraine can move together with Russia, because Russia knows only one policy: dominate, monopolize, coerce, and equalize.”

Interviewed by Mykola SIRUK, Alla DUBROVYK, The Day