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Ukraine proves unreliable partner by hiking transit prices for Russian gas

January 20, 2016, 20:00 UTC+3 Alexandrova Lyudmila

MOSCOW, December 20. /TASS/. The Ukrainian authorities’ intention to hike the price of Russian gas transit contrary to the existing contract is fraught with unpredictable consequences, including the unsanctioned use of Russia’s natural gas bound for Europe, Russian experts say.

This line of Kiev’s behavior undermines a concept safeguarded by Europe that Ukraine is a reliable gas transit country. This will possibly convince European countries in the need for alternative gas delivery routes and add arguments in favor of the Nord Stream-2 gas pipeline construction.

Ukraine, which accounts for about a half of Russian natural gas transit to Europe, intends to hike the transit cost by more than 50%, from $33.5 to about $55.8 per 1,000 cubic meters, Ukrainian Energy Minister Vladimir Demchishin said.

However, this approach contradicts the commitments assumed by the Ukrainian national energy company Naftogaz under a transit contract with Gazprom. The dispute may be transferred to the Stockholm arbitration tribunal. Ukrainian transit may turn into the most expensive route for Russian natural gas delivery to Europe.

"The Ukrainians have long stated that they are going to revise the transit tariff unilaterally," National Energy Security Fund Deputy Director Alexei Grivach told TASS.

"The contract that may not be changed unilaterally by decision of the Ukrainian government clearly prescribes the tariff rate and the price formula. This may be changed either by agreement between the parties or through a court ruling," the expert said.

"There are no real legal grounds for Ukraine to raise the tariff. The Ukrainian authorities have always demonstrated that they can take any most inadequate decisions. A risk exists that this story will be artificially radicalized and this may happen already in February. They may say: you owe money to us and that is why we won’t pay you for gas,’ after which they will switch to the unsanctioned gas take-off. Part of the gas will fail to reach European consumers and they will file claims to Gazprom," the expert said.

Europe will hardly be delighted by this, he added.

"This contradicts the concept of Ukraine as a reliable transit country, which is safeguarded by some European states advocating further transit across that country," the expert said, adding that the projects to reduce Russia’s dependence on Ukraine, first of all, the Nord Stream-2 project, would get additional trump cards.

In the expert’s opinion, Kiev has made this decision primarily "for internal consumption." "They will be telling their electors: ‘We’re trying to punish Russia.’ But this does not meet Ukraine’s real interests. This is not only a silly thing but a breach of generally accepted European norms," the expert said.

"Ukraine’s logic is as follows: it understands that Gazprom won’t give additional money above the volumes prescribed in the contract," leading analyst of the Fund Igor Yushkov told TASS.

"But if Ukraine is gripped with colds by the end of winter and Kiev has a shortage of gas in underground storage facilities, it will begin to illegally siphon off gas and will say that it is doing this to get money as debt repayment for the transit. This is such a scenario for force majeure circumstances," the expert said.

According to the expert, Ukraine is increasingly losing Europe’s trust. "So far, we can’t fulfill all our contracts with Europe without the Ukrainian gas transportation system. The strategic task is to create as many facilities as is needed to have at least a choice," the expert said.

"Germany as the EU leader understands that despite all divergences with Russia, it remains the last reliable gas supplier to Europe at acceptable prices," the expert noted.

"The countries of Northern and North-Western Europe understand well that they need to ensure their energy security. That is why, they are quietly implementing the Nord Stream 2 project. But the southern direction - Turkey and Southern Europe - is the main problem, if we want to give up gas transit across Ukraine. This is a very complex issue with regard to the southern direction," he added.

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