Consortium for One
Last month’s forecast by Russia’s premier Mikhail Kasyanov saying that September will be “deadline” for preparing a project on creating the international gas transport consortium and its business plan did not come true. The council of members of the International Consortium on Management and Developing Ukraine’s Gas Transport System, where Russia was represented by its deputy head of government Viktor Khristenko, prolonged this term until yearend. The business plan also didn’t come up in time. Most models over which so many lances were broken, obviously, were cast aside. The Naftohaz Ukrayiny press service gave only vague information on the decision to adopt some draft business plan as a basis to be further worked out... Thus the consortium, to use the terms of obstetrics, is overdue.
However, its side branch is further developing. The council of members agreed with the previously made decision to implement the investment project to broaden Ukraine’s natural gas transport network in the Novopskov-Uzhhorod direction with further increasing the volume of transporting natural gas by this route. This is Naftohaz’s version for the naХve. Russia’s version — to build a new Novopskov-Uzhhorod gas line costing $2 to 2.5 billion — is also intended for the naХve. Naftohaz even solemnly announced, “Implementing this project will be the first stage of the consortium’s activity in the investment phase.”
The council of members ordered Naftohaz Ukrayiny and Gazprom with the participation of experts to work out and pass before December 1 detailed technical and economic data regarding the construction, financing schemes, and calculation on the new gas line’s capacity. They also promised that in the framework for carrying out the consortium’s main goal the work will be continued by means of calculating the effectiveness of managing Ukraine’s gas transport system under a concession.
Recall that in his interview with The Day Minister for Fuel and Energy Serhiy Yermilov in fact confirmed that the consortium’s organizers had come to something of a dead end. By law, Ukraine’s gas transport system cannot be privatized or given over for external management and therefore cannot be transferred to the consortium. However, a way out was found. The consortium (in fact, Russia) ostensibly relinquishes its claims on Ukraine’s gas transport system and instead modestly wants only one gas line constructed in Soviet times, the 1500 kilometers long Soyuz [Union]. Experts believe that in fact this is not about constructing a new gas line parallel to the Soyuz but only reconstructing separate sections to increase its carrying capacity. It is interesting that neither Ukraine nor Russia, which is bogged down in gigantic gas projects, has the money for any more large-scale construction. This was also confirmed by Viktor Khristenko who announced that the project could be only 20-25% financed from internal sources. However, the Russians most probably supported by Naftohaz see the point in investing precisely a quarter of the money needed for renewing the Soyuz gas line and obtain it in toto, which looks rather dubious from the viewpoint of Ukrainian legislation. In part, Ukrainian Vice Premier Vitaly Haiduk said that new capacities (note that, unlike Khristenko, he did not use the word, gas line) could work in an autonomous mode as well as in connection with the current gas transport system.
Interestingly, speaking about the guarantees for the renewed Soyuz’s work, Mr. Khristenko stressed that Gazprom define the gas sources, including Central Asian ones. Today in this direction Turkmen and other Central Asian gas is transported. By gaining control over the Soyuz, Gazprom also will obtain control over alternative energy resources coming to Ukraine and will be able to influence not only our country’s gas balance but also the price for this strategic fuel.
One of the arguments by the Soyuz plan supporters is the opportunity to increase Ukraine’s gas transport system capacity to 131 billion cubic meters output. However, as is known, today it is practically the same (130-140 billion), save that it is not completely utilized. Then why construct a new line?
Further graphic evidence of this concealed craftiness is Khristenko’s statement that construction of the Aleksandrov Gai-Novopskov line on Russian territory, by which natural gas will be carried to the Novopskov-Uzhhorod line, will not be included in the consortium. However, the Russian gas line capacities correspond to the productivity of the Soyuz Ukrainian section, meaning that there is no point to reconstruct them at different times.
At the members’ meeting it also became clear that it is not planned to involve Kazakhstan, Turkmenistan, or Uzbekistan in the consortium, as Serhiy Yermilov had announced earlier. A statement to this effect was made by Mr. Haiduk but was probably inspired by Russia. Minister Kasyanov said he does not take this idea seriously, since this was the first time he had heard about it. However, so far European bidders for participation in the consortium have little chance. Germany cannot be admitted to negotiations before October when Ukraine and Russia expect to smooth out their existing differences.
All these negative aspects are to some extent relieved by the hope that Gazprom would make some move toward Ukraine’s interests. In part, the Russian gas monopolist commissioned the Giprogaztsentr research institute with pre-investment development within the framework of the Central Asian program envisaging construction or broadening the gas pipeline on the territory of Turkmenistan, Uzbekistan, and Kazakhstan. Ukraine, in need of alternative energy sources, also insists on this, as does Turkmenistan, which is unsuccessfully seeking its own route for its gas to Europe. If Russia’s signal means anything more than sly pragmatism, Ukraine can view it as a completely trustworthy promissory note.
