Ukraine's new proposals on developing gas relations with Russia

Representatives of Ukraine's Party of Regions and the winner of the latest presidential elections, Viktor Yanukovich, keep exploring opportunities of getting new concessions from Russia on hydrocarbons (first of all on gas). Few concrete proposals have been made so far; the current task of Yanukovich's team is to lure Moscow by somewhat abstract promises in exchange for real concessions inter alia on gas prices. Among such general "promises" are "leaks" from Yanukovich's team regarding a possible integration process between Ukraine and the Customs Union of Russia, Belarus and Kazakhstan. And so far it is not about Ukraine's direct accession to the customs union, although such a move could satisfy geopolitical ambitions of Moscow claiming the status of some new world center of power former members of the USSR are gathering around. The second part of Yanukovich's proposals concerns a gas transportation consortium that should consist of three equal stakeholders: Ukraine, Russia and the European Union. This proposal also lacks specifics. Yet, the idea of consortium, although expressed long ago, is quite progressive and one of the best possibilities to develop civilized relations in the Russia-Ukraine-EU gas triangle.

The Russian side is not rushing to respond to Yanukovich's proposals. Firstly, Moscow long ago adopted fundamental decisions on laying pipelines bypassing Ukraine (Nord Stream and South Stream) and considers them to be priority in the next few years. Huge efforts and resources have been spent on promoting these projects and stepping back will put Russia into a stupid situation. Moreover, construction of pipelines is quite profitable and corresponding businesses have serious lobbying capacities in Moscow. Secondly, in exchange for "ceding" the gas transportation system Yanukovich demands immediate concession in the form of changes in the January 19, 2009 contract. Yanukovich is interested in urgent reduction in Russian gas prices. This is a demand of owners of large industrial enterprises behind the new president - first of all metal companies belonging to Rinat Akhmetov. But this fully contradicts Gazprom's long ago declared task of switching to pragmatic market relations with its CIS consumers. This is a reason for the delay in Russia's official response to proposals and signals coming from Yanukovich.

By Stanislav Mitrakhovich, NESF leading expert