Gas war: Russia strikes

The threats, bluffs, pressure and maneuvers are over. Russia has finally deployed the gas weapon with the decision to stop supplying Ukraine with gas. It is a major escalation of a dispute which started with Russia’s annexation of Ukraine’s Crimean peninsula followed by Russia’s state-owned gas giant, Gazprom, demanding that Kyiv settle its huge gas debt.

The brinksmanship started in April 2014 when Russia suddenly imposed an 81 per cent rise in the price of gas to $485.50 per 1,000 cubic metres in order to rattle Ukraine’s new post-revolutionary government. Ukraine responded by offering to pay $326, but talks between the two sides made no progress.

This dispute has consequences that stretch far beyond Ukraine’s borders. A string of European countries receive gas from Russia via pipelines running across Ukrainian territory.

Slovakia gets 80 per cent of its gas in this way; Bulgaria receives close to 90 per cent. In all, about 15 per cent of all European gas imports use pipelines through Ukraine.

Does it mean Europe is cut off?

The European Union sided with Ukraine and slapped sanctions against Russia. They are also mediating in the current gas negotiations between the two countries.

The warm weather also means demand for gas is currently low and potential cuts would be less disruptive than in 2006 and 2009, when the disputes took place in winter months. Gas storage units in the European Union are a record 65-percent full.

In addition, gas supply contracts have been amended since the 2009 crisis. Gazprom is now responsible for getting gas all the way to the Ukrainian-EU border, instead of selling its gas to Europe on the Russian-Ukrainian border as in the past. This could reduce the risk of Ukraine drawing on Russian gas destined for customers in Europe, as it did five years ago.

Russia completed the Nord Stream pipeline in 2011. New infrastructure also means Ukraine’s gas pipelines play less of a role than in previous energy crises. Russia will continue supplying the Nordstream pipeline, which sends its gas straight to Germany via the Baltic sea. Germany could, in theory, import more supplies through this route and then pass on the gas to countries that depend on Ukrainian pipelines.

Frank Uzuegbunam