Who Wants to Keep Gas Flowing Through Ukraine and Why?
Pyotr ISKENDEROV 27.12.2016 09:45

This past year of 2016 set a new record for the export history of Gazprom, Russia’s biggest gas company. Its chairman, Alexey Miller, has claimed that by the end of the year Gazprom will have shipped a total of 180 billion cubic meters to non-CIS countries.

Gazprom had only planned to export between 166 and 170 billion cubic meters of gas in 2016 (in 2015, 158.56 billion cubic meters of gas were delivered to non-CIS countries).

But even this new high is not the limit. Gazprom’s latest calculations envision a further uptick in shipments in 2017, and those will primarily be to the European Union. The key factors here are, first and foremost, the weather conditions (this winter promises to be a more severe one in Europe than last year), and second - the jump in demand for gas in Europe that has been seen in recent months in the face of lower domestic production in EU countries.

The biggest consumers of Russian gas are still Germany (47.4 billion cubic meters in 2015), Turkey (27 billion), Italy (24.4 billion), Great Britain (22.5 billion), and France (10.5 billion). And Russian gas shipments play a very important role in ensuring the energy security of Southeastern Europe. In 2015 Bulgaria purchased 3.1 billion cubic meters of gas from the companies that make up the Gazprom Group, while Greece bought 2 billion cubic meters, Serbia - 1.9 billion cubic meters, and Croatia - 0.6 billion cubic meters.

The market price for Russian gas has taken some interesting twists and turns. It is worth noting that that figure has risen right along with the increase in supply. This proves once again that the close interdependence of European consumers and Russian energy suppliers is «overriding» the market formula: simultaneous growth in both supply and price is an atypical phenomenon in a market environment, however, it proves once again that any moves aimed at «replacing» Russian gas or «displacing» Russia from the EU gas market might be disruptive for Europe’s energy sector.

The attempts by some countries to block Russian gas supplies look particularly irrational in this context. This primarily applies to Poland, which rushed to the European Court to appeal the European Commission’s decision to allow Gazprom greater access to the OPAL pipeline that links Nord Stream with the gas-transit system of Central and Western Europe.

The Polish media cites the official spokesperson for the Polish Ministry of Finance, Joanna Wajda, in its reports that Warsaw has already asked the European Union to suspend the implementation of the European Commission (EC) decision. The EC’s official reaction to this proposal is still unknown, but it will be interesting to see.

The OPAL gas pipeline has a capacity of 36 billion cubic meters of gas per year, but Germany’s network regulator has only been permitting Gazprom to use 50% of that, meaning that it can pump no more than 18 billion cubic meters of gas annually. The European Commission ruled in October (which should take effect on Jan. 1, 2017) that Gazprom may bid for the right to pump another 7.7-10.2 billion cubic meters of gas through that pipeline, thus using an additional 21-28% of OPAL’s capacity.

In light of these developments, it is hard to see the position being taken by Poland - and by those in solidarity with Warsaw over this matter (or who are clearly urging that country to embark on such initiatives) - as anything but a deliberate attempt to jeopardize Europe’s energy security in order to keep gas flowing through Ukraine, so as not to threaten the survival of the regime in Kiev that is close to bankruptcy and desperately in need of that revenue in order to survive. This political objective entirely trumps any rational economic considerations.

Poland has begun criticizing not only Russia and the European Commission but also Germany over the question of gas transit through Ukraine. The Polish online news site Biznes Alert has accused the German Federal Network Agency (Bundesnetzagentur) that manages the operation of gas pipelines of colluding with Gazprom and the German companies that «trade Russian gas that passes through OPAL».

Polish politicians and the media are not displaying much ingenuity in their attempts to claim that the sun is really the moon. However, if Gazprom’s export capacity and the real picture in Europe’s energy markets are being weighed on one side of the scale, while on the other side is the political flap over the question of gas shipments through Ukraine, European countries are unlikely to act against their own interests in order to back plans being made by Warsaw and its overseas handlers. After all, this could be a really harsh winter.