Saturday, 13 February 2010

Yanukovych seeks bigger gas role for Kiev

Viktor Yanukovych is set to invite Russia and Europe to take equal stakes in Ukraine's gas transit system as he seeks to pitch his future administration as a reliable partner for gas transit.
But as he closes in on the presidency over the next few days, Yanukovych is pushing the idea that Russia should abandon its large-scale Nord Stream and South Stream pipeline projects.
After he left a Kiev polling station on Sunday, Yanukovych said Russia should boost its gas transit through Ukraine. "Ukraine's pipelines would be able to pump up to 200 billion cubic meters of gas to Europe," he said in televised remarks.
In comments to Kommersant, officials close to Yanukovych said he would offer stakes of one-third each in Ukraine's gas pipelines to Gazprom and European companies, while the remaining one-third would stay with Ukraine's Naftogaz.
But while a more reliable transit partner would be welcome for Gazprom, the energy behemoth is unlikely to want to put all its eggs in one basket again, as it would remain vulnerable to gas siphoning and other obstruction in future.
Gazprom declined to comment on any discussions. "So far, there's only a word - consortium - and no one knows what is meant by it," company spokesman Sergei Ignatiyev told The Moscow News. "So there's no use discussing it."
Analysts differed on the nuances of the proposal, with some calling it unrealistic.
"The gas transport consortium will not work and will be rejected by the Ukrainian parliament - as it has been in the past," Jonathan Stern, Director of Gas Research at the Oxford Institute for Energy Studies, said in an e-mail. As for projects bypassing Ukraine, "Nord Stream is much too far advanced to be stopped," he said.
Yanukovych's consortium offer made sense, said Vadim Mitroshin, oil and gas analyst on oil and gas at Moscow financial company Otkritie. But "a gas consortium to operate Ukraine's gas pipeline system does not give a 100 per cent guarantee that gas transits will be risk free," he said.
Mitroshin agreed that construction on Nord Stream "cannot be stopped," with contracts already in place and pipelines already purchased.
But Mikhail Korchemkin, who heads the East European Gas Analysis think tank, said it was impossible to pump 200 billion cubic metres of gas per year through Ukraine, as "Gazprom's existing contracts - including Nord Stream - total 190 billion cubic metres."
Stern, of the Oxford energy institute, said the "urgent question is whether Yanukovych will accept the current price for Russian gas or will he ask for renegotiations (as he claimed in his election campaign)."
Whether Yanukovych can haggle for a better gas price depends on how well he can balance Ukrainian and Russian interests, said Alexander Rahr, a Russia expert at the German Council on Foreign Relations in Berlin.
"Yanukovych is not the pro-Russian politician portrayed by the Western media," Rahr said.
In fact, both Tymoshenko and Yanukovych were keen on reconciliation with Russia on a number of other issues, Rahr said. "I would expect him to prolong the presence of the Black Sea Fleet in Sevastopol, but in turn he will negotiate some better deals for Ukraine in the gas trade."
Currently, cash-strapped Ukraine pays the highest price for gas in Europe - part of a deal that Prime Minister Vladimir Putin agreed with Tymoshenko a year ago, when gas prices were still high.
While Yanukovych was widely dismissed as a pro-Kremlin puppet in 2004, when he had the public backing of then-President Vladimir Putin, that situation has changed radically, Rahr said. This time "Tymoshenko was Putin's [preferred] candidate," Rahr said. "Cutting deals with her and not with Yushchenko, he helped her ... push Yushchenko to the sidelines... and raise her image."

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