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“Ukrainian Front” and Problem of Gas Supplies to Europe

“Ukrainian Front” and Problem of Gas Supplies to Europe

We have entered the year 2010 without “gas war” with Ukraine. Yet, neither this fact nor the completion of the presidential election campaign coupled with Viktor Yushchenko’s retirement as president makes the situation stable and predictable.

Another episode of the Ukrainian political “docusoap” is beginning and it is going to seriously influence both the problem of gas transit via this country and natural gas supplies to its domestic market.

The long-lasting systemic and personal political crisis in Ukraine is one of the major risk factors for Russian gas deliveries to Europe. No wonder that the major suspension in Gazprom’s supplies happened on this route. But the Ukrainian market and its gas transportation system are potentially interesting objects both for corporations and mediatory organizations to manage and generate profits.

Moreover, in the medium-term perspective there will be no real alternative to ensuring fuel transit from Russia to the EU, which makes the interested sides work out tactics and strategy of cooperation regardless of political conjuncture hedging political risks by technical, diplomatic, commercial and PR methods

The report offers an in-depth discussion of the following subjects:

  • The new president’s views on the future of gas relations

    • Future changes in the Ukrainian government and new gas and political conflict lines
  • The fate of Russian-Ukrainian gas contracts

    • Vitality of the "January 19th system" and results of its first year of functioning. Main weak points.
  • The Ukrainian gas market: infrastructure and economy

    • The consumption and distribution system
    • Pricing and the network’s technical condition
  • Upcoming bankruptcy of Naftogas

    • The economic crisis in Ukraine and the problem of gas payments
    • Managerial and financial collapse of Naftogas
  • Positions of Russia and the EU. Prospects of a gas transportation consortium

    • Modernization Declaration and Eastern Partnership
    • Prospects of applying European rules of access to the gas infrastructure in Ukraine
    • Position of the EU’s new leadership
  • Forecast of developments


  • The new president and a new course


  • Prospects of reforming the Ukrainian gas market

  • New battles within the Russia-EU-Ukraine “gas triangle”


The contents of the report:

Introduction 2
Chapter 1. System of Gas Transit and Supplies to Ukraine: Open Circuit 4
1.1. Development of Relations. Turkmen Problem 4
1.2. First Gas War and January 4, 2006  Agreement 7
1.3. Second Gas War, New Contractual System of January 19, 2009 10
Chapter 2. Ukrainian Gas Market: Infrastructure and Economy 13
2.1. Production 13
2.2. Gas Transportation System and Underground Gas Storage Facilities 16
2.3. Consumer Market Structure and Gas Marketing 19
2.4. Gas Distributing Organizations and Attempts to Consolidate Them 22
2.5. Pricing on Domestic Gas Market 24
Chapter 3. Problem of Payments for Russian Gas. Upcoming Bankruptcy of Naftogaz 26
3.1. New Pricing and Tariff Formula 27
3.2. Naftogaz’s Tax Burden 31
3.3. Managerial and Financial Collapse of Naftogaz. Credit Tsunami 32
Chapter 4. Between Russia and Europe 35
4.1. Gas Transportation Consortium and Pipelines Bypassing Ukraine 35
4.2. Modernization Declaration and Eastern Partnership 37
4.3. Russian-European Deadlock Through Ukrainian Lenses 40
4.3. Credit PR 41
Chapter 5. Forecast of Developments 43
5.1. Elections. Results and Perspectives of Formation of New Coalition 43
5.2. Gas Relations with Russia. Reanimation of Consortium for Managing GTS 45
Date of issue February 27, 2010

If you are interested to obtain please contact » Elena Kim

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After February 2022 the agenda was radically rewritten. Western companies began leaving Russia en masse, economic relations with the West were drastically reduced, and the Russian economy began to be pushed violently from the global economic space, hemmed in by sweeping sanctions. All that was, to put it mildly, not the best background for talking about ESG. Especially because tasks of survival and stability under unprecedented pressure became the priority in the economy. In late 2022, however, attempts to reanimate the ESG agenda already became obvious. The message is put across insistently that it is important to Russia regardless of the foreign policy situation. While earlier the “green pivot” was seen as an opportunity to attract Western investors and their technological solutions to Russia, now Keynesian reliance on domestic manufacture is discussed.
Oil and Gas Sector Regulation in 2022 and Prospects for 2023
Gazprom at the Forefront of Economic and Political Battles with Europe
Gazprom is being actively thrown out of the market. Its annual supplies to Europe have shrunk from the previous 150 billion to 65 billion cubic metres of gas. European officials assure that they have already learnt how to live without Russian gas, so they will bring its purchases down to but nominal values in 2023. Their main hope is liquefied natural gas. Today the EU must make a crucial decision: whether it has passed the point of no return in gas business with Russia and whether it is certain that its economy will endure without supplies of Russian pipeline gas. Or, on the contrary, Europe will realise after all that the gas balance will not be achieved and the payment for so headlong a rush for LNG will be disproportionate. Assessment of the potential volume of LNG that will appear on the market before the end of the current decade will be the most important factor for making the decision.

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