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Ukraine: Russia Intensifies Energy Squabble

Boston, 16 December 1999 (RFE/RL) -- As Russia threatens to cut Ukraine's supply of energy, the two countries are renewing their conflicts over both strategic and electrical power.

Last Friday, Russian Energy Minister Viktor Kalyuzhny threatened to suspend deliveries of oil and electricity to Ukraine after its alleged thefts of natural gas. But on Monday, Ukrainian First Deputy Prime Minister Anatoly Kinakh brushed off the threat, saying there were no Russian electricity exports, in any case, and oil is handled only by commercial firms.

The latest round in the long-running dispute started last month after Turkey complained that a 30 percent drop in gas pressure had forced blackouts and heat shutdowns in cities including Ankara and Istanbul. Gas supplies from a Russian pipeline running through Ukraine were reportedly diverted. Kaluzhny charged Ukraine with stealing 150 million to 200 million cubic meters of gas per day.

If the theft figures are accurate, other countries could suffer shortages. The Turkish pipeline company Botas blamed freezing weather and said Russia's daily deliveries had fallen from 27 million to 20 million cubic meters. The difference of only 7 million cubic meters leaves a huge amount unaccounted for. Turkey is at the end of the Russian line through Ukraine, supplying countries including Bulgaria and Romania. But other transit lines lead to Slovakia, the Czech Republic and Germany. It is not clear whether these have also been hit.

Russian complaints about Ukrainian thefts and unpaid debts have been periodic since at least 1994. But because lines to Germany run through Ukraine, there is little to be done. Ukraine recognizes only a fraction of its debts, saying the arrears of private enterprises are not the government's concern. Kaluzhny's threat to cut oil and electricity instead of gas is a sign of Russia's powerlessness. But Moscow has taken steps that could someday leave an unrepentant Ukraine in the cold.

A new line that opened this year through Belarus and Poland to Germany gives Russia an alternate route. In August, Gazprom and BASF of Germany completed Western Europe's largest gas storage facility in Lower Saxony. The site can store 4,200 million cubic meters of gas, allowing Germany to smooth out disruptions to supplies.

In addition, Turkey is taking the latest shortage as an argument for backing Blue Stream, Russia's project to pipe gas across the Black Sea without crossing Ukraine. The alternatives may not eliminate dependence on Ukrainian transit, but they could lessen it dramatically.

Several elements appear to contribute to Ukrainian diversions. Cash shortage are only part of the problem. Consumption figures suggest habitual waste.

Ukraine uses about 75,000 million cubic meters of gas per year, some six times as much as Turkey, although its population is about 20 percent less. Climate and industrialization may be counted as factors. But reliance on Russian gas transit also gives the government little incentive to push energy reforms. Ukrainian officials said recently that they expect to receive 31,500 million cubic meters in free gas this year as Russian transit fees.

On the political front, the current dispute with Ukraine has erupted in the context of Russia's union treaty with Belarus. Although Ukraine expects a decrease of only 10 to 15 percent in Russian gas transit across its territory next year, the treaty may mean far greater use of the route across Belarus in the future.

Turkmenistan has also reopened talks with Ukraine about gas sales, despite lax payments that led to suspension of deliveries through Russian pipelines last May. Russia may still profit by piping gas from Turkmenistan to Ukraine, while Ashgabat's only other current customer is Iran. For the time being, Russia may be content to sit back and watch while Turkmenistan tries to collect debts from Kyiv.

The effect of future transit schemes is hard to predict. But if Turkmenistan succeeds in building a trans-Caspian gas line to Turkey, it would bypass not only Russia but Ukraine. The plan also calls for selling excess gas through Turkey to Europe, a scheme that relies on one significant but so far unexamined detail.

So far, all gas lines lead to Turkey. None lead away. The trans-Caspian plan to supply Europe means that costly new lines must be built from Turkey or the current direction of supply lines through Eastern Europe must be reversed. Either way, an excess of trans-Caspian gas would work against Russia on at least one of its routes.

Such a change could prove be a major shift in the strategic energy patterns of the region, affecting not only Russia but Ukraine. Russia's contradictory role as the dominant but powerless supplier could undergo fundamental change. Ukraine's leverage as a transit country for gas could also be greatly reduced, and Kyiv may suddenly find that it is no longer at the head of the line.