Sergei Kulikov
Prime Minister Vladimir Putin has announced Russia's intentions in the current gas conflict with Ukraine. In a Sunday interview with the German television network ARD, Mr Putin advised Europe to lend money to Kiev for payments to Gazprom and soften its position on the construction of alternative pipelines. He expressed Russia's readiness to take part in operating and privatising Ukraine's gas transportation network. However, experts believe that Kiev is not prepared to lose control over this network under any conditions whatsoever.
Such declared intentions make it clear why this time round the traditional New Year gas bargaining between Russia and Ukraine developed into a gas war, which led to the suspension of Russian gas supplies to Europe.
The intensity of the gas dispute between the two countries looked surprising because by the end of the last year they had managed to adjust their positions on the prices of gas and transit. In addition, Ukraine's Naftogaz had transferred the bulk of its two billion dollar debt to Gazprom (roughly $1.5 billion), and promised to pay the remaining $614 million based on the results of the lawsuit.
Naftogaz representatives said on December 31, that Gazprom insisted that Ukraine should pay $250 per thousand cubic meters (tcm) of gas, and that the transit rate should remain $1.7 per tcm, whereas Ukraine was ready to pay $235 at most, and $1.8, respectively. Such a small discrepancy could have easily been removed through further negotiations but this did not happen and the gas tap to Europe was turned off. Gazprom accused Ukraine of stealing some 20 million cubic meters of gas per day and stopped its gas supplies, which made Europe nervous - the continent was freezing as a result of sudden frosts. The conflict had not reached such a scale even in 2006, when Ukraine siphoned off 120 million cubic meters of gas per day.
Putin told ARD that Gazprom had lost about $800 million from the cessation of gas transit via Ukraine. Notably, the interview was to go on air on January 14, but had already been extensively quoted by the Russian media. Evidently, Moscow is sparing no effort to specify its goals in the gas war to the Europeans and Ukrainians, and explain to Russians why Gazprom is ready to lose millions of dollars. These losses are comparable or even larger than those that could have been sustained by Moscow had it agreed to meet all of Ukraine's requirements on the outstanding issues of late December.
"Gazprom suffers losses by undersupplying its product to its partners," Mr Putin said, adding that "[Gazprom] had to suspend the operation of 100 wells, though without the danger of technological consequences; its image is also suffering." Having said this, he announced ambitious targets pursued by Russia in the current gas conflict, and not only in Ukraine but also in Europe as a whole. These targets go far beyond the purely economic framework, and are increasingly adopting a geopolitical perspective.
To overcome the crisis, Mr Putin advised Europe to give a loan to Ukraine for settlements with Gazprom. He recalled that in a similar situation, Russia loaned two billion dollars to Belarus. Apart from financial assistance, Mr Putin recommended that Europe should give a clear signal to Ukraine that it should behave "in a normal, civilized manner." Mr Putin said: "To put an end to this situation, regardless of what is happening inside Ukraine, it is necessary to diversify the flows and transportation routes from the Russian producer to the European consumer." He also mentioned that Russia is ready to consider participation in privatising Ukraine's gas transportation network with the latter's consent but prefers to take part in an international consortium.
Mr Putin recalled an offer made to Ukraine several years ago. "Russia and Germany formulated the proposal and subsequently it was effectively accepted by Ukraine. We signed a joint memorandum - Russia, Ukraine and Germany - to the effect that we would create an international consortium involving other European partners - possibly Italy, France - that would rent the Ukrainian gas transportation system," he said. Mr Putin further added that Russia may take part in its privatisation if Ukraine gives its consent, but lamented that Ukraine tends to make a fetish of its gas transportation system, considering it to be its national asset, almost God-given and not subject to privatisation."
Experts do not believe that Russia will reach all of its targets. They consider it unrealistic to attain the primary goal - that is, to gain some control over Ukraine's gas transportation network. Alexander Shtok, head of the Due Diligence Department at independent consulting group 2K Audit-Business Consulting, commented on this position: "Ukraine is highly unlikely to accept this for political reasons. Control over its gas transportation system will allow Russia to increase its influence on its neighbour, and deprive Kiev of a serious lever of pressure on Russia. In any event, Kiev will do all it can to prevent this from happening."
Mr Shtok believes the most attainable goal to be a repayment of the debt (in particular, with Western loans) and an agreement on reasonable gas prices and transit tariffs for this year.
Experts interpret Russia's tough actions in cutting supplies to freezing Europe also as a means of punishment for the delay in the construction of alternative routes of Russian gas supplies to the region. Natalia Milchakova, head of fundamental analysis at the Otkrytie Financial Corporation, believes that Mr Putin's main signal to Europe is to compel it to toughen its position on Ukraine: "The European Union (EU) itself must participate in this process and facilitate diversification of supplies through Nord Stream and South Stream. Otherwise, Russia may consider rerouting its gas flow to Asia, for one, as the Russian leaders have recently mentioned. This is what makes Europe panic."
Some analysts are confident that a blow to Kiev is politically motivated. It may be a response to Ukraine's support for Tbilisi in the recent Georgian-South Ossetian conflict. Moscow has said on more than one occasion that it will never forget Kiev's unequivocal support for Georgia in this conflict.
Senior analyst at the Zerich Capital Management Investment Company Viktor Markov expressed the following opinion: "Probably, if there had been no war in the Caucasus, the response would have been calmer. Although Putin did not mention this in his interview with ARD, at a recent news conference for foreign journalists he said that Ukraine had supplied Georgia with arms."
Experts are convinced that Ukraine will not agree to privatisation of its gas transportation network under any circumstances. "This is too good a gravy train for both the current Ukrainian authorities and all kinds of mediators to ride," Milchakova believes. "What's more, this year Ukraine will have presidential elections, as well as probable, parliamentary ones. Under the circumstances, this option is becoming even more unrealistic."
Moscow also has a good understanding of this. Mr Putin mentioned it in the interview to startle Kiev, and probably the EU, in order to get from them maximal concessions on other goals, including gas prices for Ukraine in 2009.
