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Russia and EU face deadlock over gas

By Liu Qian (Global Times)    09:24, September 26, 2014
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(Illustration: Liu Rui/GT)

The conflict over natural gas between the EU and Russia due to the Ukrainian crisis has become intense. Over the past couple of weeks, Russia has reduced export of natural gas to some European countries such as Poland, Slovakia, Germany and Italy.

Interestingly, the explanations from the European side and the Russian side are totally different. As Poland and Slovakia aided Ukraine with reverse gas supplies, Ukraine criticized Russia's reduction of gas supplies as putting pressure on Europe, insisting that Moscow is trying to get Kiev to pay back a debt of what it says is about $5.2 billion for natural gas.

But Russia claimed that it had been transmitting gas to underground gas reservoirs to ensure the need during winter so that it cannot meet the demand by European countries that exceeds the already contracted volume.

Since early September, applications from European countries for Russia's gas supply have skyrocketed. After Russia halted its gas supply to Ukraine in June, Ukraine has been purchasing gas from European countries such as Poland, so as to meet domestic demand. Starting from September 2, Slovakia began to assist Ukraine with reverse gas supplies.

For a long time, Russia has had complaints about European countries' gas supply to Ukraine. In fact, the gas that the EU supplies to Ukraine comes from Russia.

The take-or-pay gas contract regulates the minimum purchasing volume of clients, but clients can require to add a volume within a certain range. Countries such as Poland have made use of this means to sell excess gas to Ukraine.

As the gas contracts between Russia and European countries have never been made public, it is hard to say whether such "grey trade" violates the contract. Russia calls such a reverse flow a "semi-fraudulent mechanism," and has said it will take action against this.

Russia's gas reductions to European countries have already had some effect.

Poland halted its gas supply to Ukraine in order to keep up its domestic demand. Slovakia also reduced its supply. It proves that without Russian gas, Europe cannot sustain its gas supply to Ukraine.

If Russia provides Europe the minimum gas in accordance with the contracts, Europe will face gas shortage in winter. That Russia reduced its gas supply is a warning to Europe to solve the gas problem in Ukraine as soon as possible.

The relations between Russia and Europe over natural gas are stuck in a paradoxical dilemma.

Neither wants to see problems with the gas supply, but the measures they have taken to secure normal gas supply in the future make the relations become intense.

Europe has been making efforts to ease the gas supply problem in Ukraine, but its reverse gas supplies have been objected by Russia.

Russia aims to raise its gas reservation capacity to ensure a normal supply in winter, but this has caused supply decline to Europe and the EU panic about gas cutoffs.

Russia and Europe have been walking at the edge of the rules of gas contracts. There have been a lack of trust and a lack of communication channels. Any unilateral action may lead to deeper misunderstandings.

The Russians used to say proudly that even in the worst periods of the Cold War, the Soviet Union didn't use the leverage of gas pipelines for its political interests.

But now, the politicized gas issue has made the rules vulnerable or even invalid.

From a long-term perspective, the EU may increase the use of renewable energy and reform the gas pricing mechanism. But it can hardly break away from the need for Russia's gas.

The top priority at the moment is to avoid panic on the market caused by opaque behavior and confrontations resulting from mutual distrust.

It remains to be seen how things will go at the trilateral gas meeting among Russia, Ukraine and the EU in Berlin on Friday. 

(Editor:Kong Defang、Huang Jin)
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