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Adrienne Warren

Stuck in the Middle With Ukraine: V4 on Energy and Protests

An October report, compiled by a consortium of the Central European Policy Institute (CEPI), EUROPEUM Institute for Economic Policy, the Hungarian Institute for International Affairs and the Institute for Economic Research and Policy Consulting, was aimed at identifying various options for Central and Eastern Europeans to diversify imports away from reliance on Gazprom. The purpose of diversification would primarily be to undercut Gazprom’s currently dominant position, and give Europe a stronger foothold in energy security. What were the practical suggestions and how does Ukraine play a key role? Let’s take another look in the context of the post-Summit Euromaidan…

Where the towns have two names: Slovakia, close to Ukraine. Author: izarbeltza, source: Flickr

Where the towns have two names: Slovakia, close to Ukraine. Author: izarbeltza, source: Flickr

The report explains the greater context of the study, saying:

“With new gas routes being built Russia will be able to supply significantly more gas at its marginal variable costs to an extended number of European consumers. In this respect the question is not only whether Europe will need Russian gas on diversified routes but also whether Europe will need more Russian gas altogether. For Europe, Gazprom is a key gas trading partner. It supplies one third of EU’s net imports and one quarter of its consumption. Central and Eastern Europe has several options to diversify imports away from Gazprom: diversification of suppliers, increase in LNG imports, and shift to a more shortterm contracting. Each option has its risks and benefits but all undermine Gazprom’s dominant position.”

Going on to offer an outline of proposed solutions to help drive this diversification process:

“The European gas trade faces a new era of short-term pricing. To prepare for it Central and Eastern Europe should solve two main challenges. First, they have to decide how the new infrastructure on the short-term pricing market will be funded. If Visegrad countries and Ukraine want to trade gas across borders and keep transporting most of the Russian gas to Europe, they need to invest into networks.”

And second?

” Second, the CEE countries have to develop spot markets to efficiently trade gas…Such markets can be easily manipulated, especially when the number of suppliers is limited. Therefore, Visegrad and Ukrainian governments should coordinate their national energy policies and name EU’s energy targets for the next decades. They could even form a buyers’ consortium within Visegrad50 with possible inclusion of Ukraine. The CEE region supply security will be enhanced from the interconnection with the Ukrainian GTS and access of European gas traders to Ukrainian underground gas storage facilities. Establishment of the gas trading hub at the Eastern border of the EU on the basis of Ukrainian and V4 gas storage capacities…could further improve the energy security in the region.”

Lastly:

“To fight Gazprom’s monopolization of the market, the CEE countries should assist the European Commission in the Gazprom antitrust probe and invite the EC representatives to the negotiations of national incumbents with Gazprom. Countries of the region should support construction of interconnectors in Ukraine and Southeastern Europe and keep exporting EU rules beyond EU’s borders vis the Energy Community and Energy Charter.”

The Show Must Go On…

Such measures to reduce Ukraine’s reliance on Russia’s gas is already being given the go ahead. In spite of the protests gripping the nation, Europe’s Energy Commissioner Guenther Oettinger confirmed today that plans to construct a reverse flow pipeline from Slovakia to Ukraine. According to European Commission officials and Ukraine’s energy minister, the deal to ship gas from the European Union through Slovakia to Ukraine has been all but agreed and just needed to be officially signed by both sides.

While construction plans will not be halted, the Visegrad Group still paused to reiterate their feelings about the protests in Ukraine and the reactions of the nations authorities in an official statement which read:

“We strongly reiterate that the use of force, particularly by a government on peaceful protesters, is unacceptable and we call on all parties to refrain from violence. We also call on the Ukrainian authorities to launch a prompt investigation against those responsible for brutality against peaceful demonstrators and demand that the wrongdoers are held accountable. The ministers also urge the Ukrainian authorities to release all those who have been arrested without any evidence of violating the law.”

The statement continues:

“The Foreign Ministers of the Visegrad countries confirm their conviction that every country has the right to make a choice on the country’s engagement it seeks with the European Union, free from outside pressure. In adopting such a decision, the political leadership has a responsibility to take into consideration the opinion of the people.

 The Visegrad countries reconfirm their position voiced at the Vilnius Summit that the door remains open for Ukraine to sign the Association Agreement with the European Union as soon as our Ukrainian partners will be able and ready to do so. The Visegrad countries are committed to continue providing assistance to Ukraine in strengthening its relations with the European Union, reform course and its modernisation.”

Meanwhile, neighbouring Russia has stepped up efforts to persuade Ukraine to join its Customs Union, highlighting the economic benefits that would result, particularly as it relates to energy exchange:

“Our integration project is based on equal rights and real economic interests. I’m sure achieving Eurasian integration will only increase interest (in it) from our other neighbours, including from our Ukrainian partners,” President Putin told reporters today.

Sources: CEPI, Ministry of Foreign Affairs Republic of PolandThe Moscow Times

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Graduated in International Relations and Russian. Resident of Estonia, but a citizen of the world. Most interested in contributing to the progress and education of mankind--as the primary tool of achieving global unity.

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