Europe is on the verge of a new gas conflict with Russia

According to the media reports, Europe is on the verge of a new, yet different from the former years, gas conflict with Russia.

European states are not able to use the annual natural gas quotas stipulated in the contracts with Russia‘s concern Gazprom. During the first half of this year Western European states bought about 29 percent less gas from Russia than it was planned (the amount of the non-purchased Ukraine‘s gas, which could improve the above indicator, is not included). According to analysts of Kommersant, Western companies forecast that gas consumption might remain low until the year 2013.

Such a situation is dangerous both for the EU and Ukraine, the main transit corridor of the Russian gas, since Russia is provided an opportunity to make a good thing of the non-fulfilled commitments of the EU Member States and Ukraine. Besides, Russia acquires one more lever providing for the achievement of the goals which are inexpedient for the EU or/and Ukraine.

The issue of gas supply to the EU via Ukraine is a good Moscow‘s persuader for Kiev, which is actively applied when Ukraine‘s policy doesn’t comply with Russia‘s interests. Russia manipulates with prices of energy resources and financial settlement deadlines etc. by trying to terminate Ukraine‘s gravitation towards the West.

This year Ukraine‘s campaigns of civil „disobedience” against Russia (participation in the EU Eastern Partnership Program, the agreement with the EU on modernization of gas pipelines etc.) were frequent as never and were firmly criticized by Russia. Moscow‘s intentions to have a pro-Russian president in Ukraine is also obvious. Although Russia‘s Prime Minister V.Putin said that Ukraine will be released from paying fines for the unfulfilled gas procurement quota, it is too early to rejoice. Because of the crisis, Ukraine currently has problems in paying for the delivered gas, thus the non-fulfilled quota might become a trump card in Russia‘s hands any time with a view to “punishing“ Ukraine.

|Russia Ukraine gas pipe conflightcomics illustration / by Monika Vass Children’s Book Illustrator|

According to analysts of the Russian investment group VTB Capital, Europe‘s incapacity to purchase the total amount of the agreed gas is useful for Russia. In order to start the construction of the pipeline Nord Stream, Russia shall settle the disagreements concerning the ecological harm of the project, and the decreasing Europe‘s demand for gas is an important argument in this dispute. The current situation in the gas market allows Russia to revise the contract concerning the gas supply of Turkmenistan to Europe, which was terminated at the beginning of this year (certainly, under conditions favorable for Russia).

The issue of the reduced consumption of the Russian gas in Europe might become a means of Moscow‘s political pressure toward the European states. Russia‘s intention not to apply sanctions to Ukraine and the fact that Gazprom didn’t get any sanctions from Turkmenistan for non-fulfillment of gas procurement contract from this state, creates a precondition for negotiations between Russia and EU Member States concerning the revision of gas supply. Moscow would probably make use of this situation in the near future in order to get political and economic dividends from the Community. By juggling with an issue of sanctions, in the near future Russia should start active operations toward the above direction. Thus a conclusion could be made that this year Russia has more levers than last year in order to politicize the supply of gas to Ukraine and (via Ukraine) to the EU.

Nonetheless, Moscow shouldn’t apply strict sanctions to the EU Member States for unfulfilled gas procurement commitments. Firstly, during the crisis Russia needs gas buyers able to settle accounts in due time. Secondly, Moscow needs political support from the EU, as well as investment to energy projects (Nord Stream and South Stream, extension of gas extraction in the Jamal peninsula etc.). Thirdly, according to M.Goldman, the U.S.energy expert, Russia understands the limits of application of energy levers to the European Union.

But the issue of quotas of gas supplied to Europe might become not only a tool of economic pressure but also an instrument for the political blackmail.

by Aivaras Bagdonas