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Ukraine: Russia Threatens To Build A New Pipeline Connection

  • Michael Lelyveld

Angered by alleged Ukrainian gas thefts, Russia has threatened to build a new bypass around the country with links between Poland and Slovakia. The move comes as Ukraine is taking new but untested steps to reform its energy laws.

Boston, 10 July 2000 (RFE/RL) -- Russia's Gazprom will reportedly build a new pipeline connection between Poland and Slovakia to eliminate what it says is the perennial problem of gas theft by Ukraine.

In the past week, Gazprom has vowed to take action against Ukraine for its latest diversion of Russian gas as it crosses the country to customers in Western Europe. The company claims that fuel is being stolen and then sold at low prices in Poland, Hungary and Romania, damaging Gazprom's business in those markets.

Yuri Komarov, a member of Gazprom's management committee, said, "This is our gas, which has not been paid for, and we will take measures, both diplomatic and legal, to stop it," the Reuters news agency reported.

The latest solution is apparently to take gas out of the Progress Pipeline that crosses Ukraine on its way to Germany and ship it through Belarus and Poland instead. The gas could then rejoin the pipeline in Slovakia, beyond the reach of Ukraine's alleged thieves. Gazprom will build the new connection within two years, the Russian publication SKRIN Issuer reported.

The plan is one of Russia's many attempts to deal with the problem of diversion, which has roiled relations with Ukraine for the past six years. Unpaid gas bills have been the biggest source of Kyiv's debt to Moscow. Estimates of Ukraine's energy arrears to Russia range from $1,4 billion dollars to more than $2 billion dollars.

Russia has tolerated the debt over the years for two major reasons. It needs transit lines through Ukraine in order to reach cash-paying customers in countries including Germany. It has also sought periodically to gain control of Ukrainian pipelines and other assets in exchange for debt.

But the move to create a detour through Poland and Slovakia may be a sign that Moscow has run out of patience. Repeated promises by Ukrainian President Leonid Kuchma to stop the stealing have had little effect.

Most recently in June, Kuchma ordered a crackdown on gas thefts, admitting that the country had taken 1,2 billion cubic meters of Russian gas illegally in May alone. Russian officials have estimated the value of stolen gas this year at over $600 million. Russia ships about 120 billion cubic meters of gas annually through Ukraine, paying it with additional gas as a transit fee.

The International Monetary Fund and other multilateral lenders have been trying to get Ukraine to reform its energy system and cut off customers who fail to pay their bills. Russian officials recently urged debtor nations to borrow funds from the IMF to pay their fuel debts to Moscow.

But Russia's solution of diverting gas around Ukraine suggests that the government of President Vladimir Putin is increasingly trying to bypass problems that it finds hard to solve. Another bypass pipeline for oil is already in the works, avoiding Ukraine and the theft problem on a route to the Black Sea. Russia also built an oil line around Chechnya this year for Caspian oil.

Moscow's answer to the Ukrainian question may leave many issues unresolved. A detour through Belarus may only succeed in recreating the difficulties in another country. In April, Gazprom cut gas deliveries to Belarus by 30 percent after complaints about its mounting bills. Similar cuts were imposed on Ukraine in the past. Ukraine responded by simply taking a greater portion of transit gas.

In the past week, Ukraine has mounted a new effort to tackle its arrears problem as President Kuchma signed an energy reform bill into law. The measure is designed to ensure that consumer payments are forwarded directly to power producers rather going to distributors. The law was a condition of further IMF aid, but its success remains to be seen.

This year, Russia has had other disputes on gas payments with countries including Moldova and Serbia. The cycle of debts and deliveries has become a constant feature of Russia's relations with dependent states.

Most of these countries remain stuck in the transition between a Soviet-style past and market economics. Energy, which is basic to subsistence, is usually one of the last areas to undergo reform. Russia has added to the problems by sending inconsistent signals about how much debt it will allow. At the same time, it has used gas to bestow political favor and pursue political power.

Russia may now be serious about standardizing its relations with all countries that consume its gas, as it struggles to meet its export commitments with limited supplies. Putin's plans for reforming Russia's own energy sector may demand that all buyers be treated on a business basis without political subsidies.

But Moscow is likely to find that reform will move slowly in countries like Ukraine and Belarus, after decades of serving as transit countries in the old Soviet-style model of subsidized energy. If the lingering legacy of subsidies and cheap gas could be easily bypassed in those countries, Russia might have done it a long time ago.