A false start
On July 9 Naftohaz Ukrainy publicly condemned the “unwarranted” interference of some politicians in the work of businesses in the gas sector. In the company’s view, this may lead to violations of existing agreements on natural gas supplies to Ukraine and obstructions in the transit of Russian gas to European Union countries.
Interference by an economic entity in the sphere of politicians’ activities can also be called inadmissible. (With this politically-correct euphemism the company is clearly signaling its intention to launch a polemic with President Yushchenko, who announced last week that he is going to raise the question of revising the existing gas agreements with President Putin of Russia.) But the whole point may be that our leaders should pursue Ukraine’s national interests instead of adopting a political approach oriented to the electorate of certain political forces and aimed at rallying voters by creating the image of an enemy.
Unfortunately, our leadership has some problems defending our country’s interests. Moreover, quite enough time has passed since 2005 for our leaders to be able to take them into account and not repeat past gas mistakes. But today the national leadership is making a new false start in the gas negotiations. It is not difficult to foresee that the result will be the same as it was last time. Naftohaz Ukrainy is well aware of this.
“Ukraine’s rejection of the current Central Asian gas supply scheme, where there are no alternative commercially viable offers of fuel deliveries to Ukrainian consumers, may result in a shortage of natural gas on the domestic market,” Naftohaz Ukrainy’s statement says. The company believes that if this happens, consumers will be illegally siphoning off Russian gas in transit to European countries, which will lead to the non-fulfillment of interstate contracts on the quantities of Russian gas to be transported across the territory of Ukraine.
“Should the existing gas supply agreements be broken, the cross-border price of fuel for Ukrainian users may nearly double,” the document emphasizes. The company recalls that Ukrainian politicians’ unwarranted statements and actions provoked a gas crisis in 2005, when Ukraine lost economically advantageous contracts with the Russian Federation, which were valid until 2011, and the price of gas shot up from $50 to $95 and later to $130 per thousand cubic meters.
In an interview published last Thursday in the Russian newspaper Vedomosti, President Yushchenko suggested changing the gas supply pattern, which may result in dropping the intermediary, the Swiss- based trader RosUkrEnergo. “If Ukraine and Russia adhere to clear- cut and transparent principles of price formation, the question of who will perform the function [of supplying gas] will be so unimportant that it will not even be discussed by high-ranking officials,” the publication quotes Viktor Yushchenko as saying. According to the president, the price of gas imported by Ukraine may rise in 2008, but it will be “beneficial and profitable” for Ukrainian industry to purchase gas at market prices because this will increase competitiveness. Although the president balked at predicting the price of gas for Ukraine next year, he said he is certain that the Russia-proposed price of $235 per 1,000 cu. m. “has a considerable political component.”
Nobody is denying this, but a statesman’s mission lies precisely in not whipping up a political confrontation and demanding that his counterpart make “concessions” that will only muddy the waters. “A policy of liberalization should be pursued wisely on a medium-term basis: we should not change the gas price in December if the country approved the budget in September,” the president of Ukraine says, forgetting that Putin has a totally different country and does not think at all about Ukrainian interests. Our president should understand that if he demands that Russia change the pattern of Ukraine gas supply now effected via RosUkrEnergo, he may be easily met halfway and offered direct deliveries by Gazprom. In this case Ukraine would be receiving Russian, not Central Asian (Turkmen and Uzbek), gas and it will be simply impossible to avoid the $235 price tag.
Whether this will be “advantageous” to Ukrainian industry is a moot question. Some businesses may well embrace energy-saving technologies, but the vast majority is certain to have a very difficult time solving this problem. The ISD Corporation is successfully tackling the problem. Its president, Serhii Taruta, told The Day that his company will be able to tolerate the new gas price, but he vehemently denied that all our industries and the economy as a whole will be able to shoulder this burden.
