UNION GAS

Before guns quietened in Ukraine after the Minsk Agreement, the war began to flare up on gas pipes. The official reason for the disagreement between Ukraine and Russia was that Kiev stopped gas supplies to the separatist regions of Donbass. According to Naftogaz of Ukraine, the supply of gas to the southeast of the country was halted due to damage to the gas transportation infrastructure as a result of fighting. The Ukrainian operator GTS Ukrtransgaz expressed readiness to begin repairs as soon as the fighting stops and the situation is safer for its employees.

The self-proclaimed Donetsk and Luhansk people's republics considered the actions of Kiev to be against the residents of the Donbass, as they leave the inhabitants of the southeast of the country without heat in the icy winter. The same view is held in Moscow. "I know that there is a population of about 4m people there. Imagine that all these people will be left without gas in winter. It is not enough that there is famine there already and the OSCE stated that there is a humanitarian disaster there, they have now been cut off from gas. This already smacks of genocide," Russian President Vladimir Putin said at a press conference after talks with the president of Cyprus.

Immediately after gas supplies to the "DPR" and "LPR" were halted, Russian Prime Minister Dmitriy Medvedev instructed Gazprom to organize direct gas supplies to the southeast of Ukraine as humanitarian aid. Moreover, this is at the expense of the contract with Naftogaz. Given that gas is supplied to Ukraine after prepayment, the supply of "blue fuel" to other parts of the country has decreased respectively. Then Naftogaz tried to get the entire volume of gas paid in February from Russia immediately in order to deprive Moscow of the ability to deliver this fuel to the "DPR" and "LPR" directly. But Gazprom, as might be expected, refused, noting that the delivery of the entire paid volume immediately creates risks for transit supplies to Europe.

Naftogaz regarded this step of Gazprom as a breach of contract. According to the head of Naftogaz, Andrey Kobolev, requests and routes of Russian gas supplies to Ukraine, according to the contract, must come from the management of Ukrtransgaz. According to Kobolev, in this context, possible receipt by Gazprom of a request from the management of the Donbasstrangaz main gas pipelines department to obtain gas is not valid.

The European Commission also stepped in to resolve the looming conflict. According to European Commission representative Anna-Kaisa Itkonen, the transit of Russian gas to Europe has not yet been affected by the gas dispute between Moscow and Kiev. By the way, glimpses of the energy crisis did not come at the best time for Europe - the volume of reserves in storage facilities has fallen to 38 per cent - the lowest in a decade. This is due primarily to a decrease in the supply of gas from Gazprom, which is seeking to prevent reverse gas supplies to Ukraine. But European countries did not stop the reverse supplies, trebling the use of gas from storage facilities in comparison with the previous winter season.

In an official letter to the head of Naftogaz, Gazprom chief Aleksey Miller asked him to confirm in writing the condition to make further advance payments for gas only if Gazprom stops gas supplies to districts of Donetsk and Luhansk regions.

Then, the subject was evolved by presidential spokesman Dmitriy Peskov, who said that the Russian side expects Ukraine to answer the question of whether gas measuring stations (GMS) in the southeast of the country are Ukrainian territory. "Both the contract, the technical annex and the technical specifications mention certain entry points - GMS. Among them are two GMS stations, which are located in the southeast of Ukraine. In this case, it all depends on the Ukrainian side. The Ukrainian side must say: this is Ukraine and this is not Ukraine, that is to say answer the questions that were asked in the letter from Miller," Peskov said.

According to the latest information, Naftogaz transferred 15m dollars to Gazprom, which made it possible to buy gas until this week, while the issue of extending supplies will be decided during negotiations between the parties involving the European Commission.

According to the partner of the RusEnergy information and consulting company, Mikhail Krutikhin, the decision to supply gas to the southeast of Ukraine directly violates the obligations of Gazprom in the contact with Naftogaz. "In fact, gas is being supplied to separatists without customs clearance, i.e. through smuggling. And Kiev has no intention of paying for such supplies," Krutikhin told R+.

According to him, this situation could lead to interruptions in the supply of gas to Europe in the form of blackmail by Gazprom. "Blackmail constantly comes in the form of threats to cut off gas supplies allegedly due to the unauthorized withdrawal of gas by Ukrainians, although it is impossible to prove it as Ukraine publishes daily data on the traffic of gas volumes," the expert said.

At the same time, Krutikhin believes, gas supplies to the southeast of Ukraine bypassing Naftogaz are unlikely to lead to sanctions against the Russian monopoly. "I cannot imagine the EU imposing sanctions due to the fact that Gazprom violates a contract with another company, sending the gas in the wrong direction. The grounds for political decisions are rather weak," Krutikhin said, noting that only the impossibility of doing without Gazprom's gas stops Europe.

The question of diversifying sources of energy becomes more and more acute for Europe. Although the need for alternative gas supplies has been spoken about for a long time, no real steps were taken until recently. Therefore, according to European Commission Vice-President for Energy Union Maros Sefcovic, the EU took into account the mistakes of the past, which led to the closure of the Nabucco project: "We have learned from Nabucco. The project failed due to the lack of sufficient political support."

Within the framework of the greater consolidation of the EU in matters of energy diversification, the strategy of the European Union's energy union aimed precisely at reducing dependence on issues of gas supplies from Russia was presented. "I think that Europe is really tired of holding a debate every summer on how to do it before the winter. The world's largest economy should not have such fears in the 21st century," Sefcovic said. He explained that Russia will remain "a very important supplier to the EU, but its influence will be smaller".

The strategy of the EU Energy Union defines the list of potential partners of the EU in energy supplies, among which the main place is occupied by Azerbaijan, Turkmenistan, Turkey, Algeria, and in the longer term, Iraq and Iran. Russia is not on the list of strategic partners. Moreover, the EU hopes "to reformat energy relations with Russia, when suitable conditions come up". At the same time, the EU intends to sign a tripartite memorandum with Baku and Ashgabat on the construction of the Trans-Caspian gas pipeline later this year.

The EU has realized that the main obstacle to Turkmen gas supplies to Europe is the position of Russia, which, according to Sefcovic, "insists that gas from the Caspian coastal region can only be supplied with the consent of neighbouring countries". However, Europe hopes to find a technical and legal framework to overcome Moscow's opposition. "Since we (EU) want to diversify our sources, I think that the countries around the Caspian Sea equally want to diversify their export routes," said the vice-president of the European Commission for Energy Union.

In addition to pipeline gas, the EU also intends to comprehensively develop the supply of liquefied natural gas (LNG). "We will create a European strategy for liquefied gas. This will give an opportunity to deliver it to Europe and have an infrastructure that enables the correct use of this gas," European Commissioner Miguel Arias Canete said at the presentation of the strategy.

The European Commission also plans to develop the mutual relationship between energy infrastructures within the European Union so that EU member states have the opportunity to help each other if necessary. And in this respect, the interests of Europe and the United States, which seek to reduce the share of Russia on the Eastern European market by 20 per cent by 2020, coincide.

To achieve these goals, the United States helps to build new gas pipelines and terminals for liquefied gas storage in the region, which is more than 70 per cent dependent on Russian energy supplies.

With US support, Lithuania and Poland will import liquefied natural gas from Norway, Qatar and, in the future, from the United States. In particular, Lithuania has already stated that it is ready to buy LNG immediately as soon as US companies begin to export it. "We can offer LNG exporters to supply gas via the Klaipeda terminal not only to Lithuania but also to Latvia and Estonia, and from 2019 - to consumers in Poland and Ukraine," Lithuanian Minister of Energy Rokas Masiulis said.

But the main point of the new strategy of the European Energy Union is the European Commission's intention to change the rules of signing gas contracts. According to the current practice, the European Commission receives information about contracts and intergovernmental agreements after their signing. According to the proposed scheme, the European Commission also wants to be represented in the early stages of negotiations on gas supplies, which will "help individual countries to resist the pressure" from third countries. With the introduction of this mechanism, the European Commission will be able to some extent to dictate conditions to the gas supplier, seeking to reduce the cost by including parameters of spot market prices, as well as to take into account the possibility of reverse gas supplies. It is clear that at this stage, this desire is primarily due to opposition to the monopolistic position of Gazprom in some EU countries. But in the longer term, this provision can affect other suppliers too. In particular, the EU could block contracts from third countries, putting forward all sorts of conditions, for example, of a political nature, which have nothing to do with the issue of gas.

At this stage, the EU is ready to develop any project to supply gas from virtually any region except Russia. And the continuing confrontation between the West and Russia will increasingly empower countries that offer a gas alternative for Europe.

Azerbaijan has already managed to get part of the redistributed European gas market by initiating and actively promoting the Southern Gas Corridor project. The importance of this route in the coming years could increase even more if Turkmenistan and later Iraq and Iran join it.

But the last thesis depends on the determination of the EU to implement its plans to diversify energy sources.