Key findings

 

The Russian-Ukrainian gas conflict has a negative impact on both countries, and is against their political and economic interests, but can accelerate EU’s actions towards decreasing energy- and political dependence on Russia.

 

Even if the North and South Streams are built, Ukraine will remain a major transhipment route for Russian gas. This forces Russia to come to terms with its neighbour and find a long-term solution to the price question.

 

The conflict intensifies fears of “addiction” to Russian gas, and it can urge the EU member states to work out a common energy policy scheme. Projects aiming to decrease energy dependence on Russia can start up, although slowly:

  • the acceleration of the (still very uncertain) Nabucco project,
  • new plans to build new nuclear power stations,
  • steps taken towards the diversification of the energy usage by the EU and member countries by developing alternative energy supply and usage. Investments in green energy and nuclear power can counterweight somenegative effects of the economic crisis in Europe.

 

The conflict turns gas dependence into an acute problem and accelerates political efforts to decrease it – even in those countries that recently have kept relatively good relations with Moscow (e.g. Slovakia, Serbia, Hungary).

 

In the long run, the main loser of the conflict will obviously be Ukraine. Due to the gas dispute, South Stream is gaining momentum, with Russia benefiting from it, and the amount of gas passing through Ukraine may decrease.

 

Jeopardising international gas supplies can considerably worsen EU opinion on Ukraine, which can lead to decreasing investments in the country and a slowdown of the EU-integration process. On the other side, EU will make attempts to strengthen the relations with Turkey, a possible transfer country for alternative gas pipelines.

 

The interests of Ukraine

 

Ukraine can easily end up caught between two stools: anti-Russian sentiment will increase, but it will not get any closer to the EU either; on the contrary, it will move further away. Ukraine may be cut out from gas transport if the South Stream is built, which is more realistic and is in a more advanced state than the Nabucco project. It would not mean that Ukraine loses its strategic importance for Moscow, but its bargaining position to both directions may worsen.

 

The gas dispute enhances struggles in domestic politics. The conflict can increase instability in the already fragile Ukraine; in an extreme situation, it can lead to intensified dividedness of the country (pro-Russian East vs. anti-Russian West).

 

 

The interests of Russia

 

The EU is Russia’s biggest buyer of energy, so the start and increase of European diversification would lead to significant losses of revenues in Russia. (Oil and gas exports provide about 60 percent of the Russian budget income.) Moscow’s interest is to build alternative pipelines passing through Russia (Nord and South Stream); but the same time, the present conflict accelerates steps toward gas independence from Russia (Nabucco and green energy investments), which is against the interest of the country. Though it must be taken into consideration that if North and Shouth Streams are built the two pipelines will transport only 25 % of the amount currently passing through Ukraine. Thus Ukraine will remain a major transport route for the Russian gas to the EU for a long time. This fact forces Russia to somehow come to terms with Ukraine and find long-term solution to the price dispute.


On the other hand, Moscow aims to keep Ukraine away from the EU and the NATO. The conflict with Georgia has already proven that Russia is ready to go to any length to protect its sphere of interest, and to take advantage of the dividedness of the transatlantic states.

 

By shutting down the pipeline Russia can shake the position of pro-western Viktor Juscsenko putting pressure on the domestic politics of Ukraine.

 

 

Background

 

All gas supplies to Europe via Ukraine were shut down on Tuesday as the pricing dispute between Russia and Ukraine escalated, which caught whole Europe totally unprepared.

The Ukrainian and Russian parties blame each other for ending all transhipments to Europe. The EU countries have access to some other gas sources (Russian gas from other pipelines, and gas produced in Britain, the Netherlands and Norway), while the shutdown left Slovakia, the Czech Republic, Austria, Hungary, Romania, Bulgaria, Serbia, Croatia, Bosnia and Macedonia with no Russian gas supplies.

Russia’s aim is to update old and unreal contracts, thus they want to sell gas to Ukraine at a market price – app. 400 US dollar / thousand m3 – achieved gradually, so they asked for $250, while Ukraine wants to pay only $201 and to compensate for the dierence by increasing transit fees.