Ukrainian minister suggests Russia independently supply gas to Donbass

It is certainly possible to arrange autonomous supplies of gas from Russia to Donbass using the Taganrog-Mariupol pipeline. Source: PhotoXpress

It is certainly possible to arrange autonomous supplies of gas from Russia to Donbass using the Taganrog-Mariupol pipeline. Source: PhotoXpress

Ukraine’s Minister of Finance proposed that Russia, bypassing the authorities in Kiev, supply gas to the Donetsk and Lugansk People’s Republics. The technical capability –a pipe – exists. However, legal complications may come in the way.

Oleksander Shlapak , Ukraine’s Minister of Finance proposed that Russia independently supply gas to the territory of Donbass (the Lugansk and Donetsk regions). “If it comes to that, then why don’t you supply the gas? If you have that capability and those people there in charge are prepared to pay you for your benefit… They are not willing to pay us for our gain,” Shlapak said. The region owes Ukraine’s Naftogaz around $308 million.

Such a proposal has not been officially voiced, says Yuri Korolchuk, a member of the Observation Council of the Energy Strategies Institute (Ukraine). “Based on the information I have, this issue has never been raised in gas talks (Russia-EU-Ukraine) because the European Commission as a third party in the negotiations has distanced itself from the Crimea problem as well as the political issue, which is what they call it, that is the military activities in the Donetsk and regions,” says Korolchuk.

So far only the self-proclaimed Donetsk People’s Republic (DPR) authorities have approached Russia with a request to consider the Lugansk People’s Republic (LPR) and DPR as separate from Ukraine with regards to the gas issue. They have even begun to restore the Taganrog-Mariupol gas pipeline that was operating back in Soviet times and closed in 2009. In early September, the DPR leadership announced that dialogue was, supposedly, underway with the Russian authorities on gas supplies to Donbass, but Russia did not confirm this.

Technical feasibility versus legal barrier

From a technical point of view, it is certainly possible to arrange autonomous supplies of gas from Russia to Donbass using the Taganrog-Mariupol pipeline. It is necessary to replace the pipe on some segments and it needs to be completely re-laid on others.

However, since the DPR and LPR are legally a part of Ukraine, Russia does not have the legal right to supply this gas. This means, first of all, that, according to the prevailing contract signed in 2009, the subjects of gas relations between Ukraine and Russia are Naftogaz and Gazprom. Secondly, the Taganrog-Mariupol pipeline belongs to Ukraine. This pipe is most likely the property of Naftogaz, says Sergey Pikin, the Director of the Energy Development Fund.

In order for Russia to start independently supplying gas to the territory of Donbass, as Shlapak proposed, Kiev must first recognize the independence and autonomy of the DPR and LPR. Then the Taganrog-Mariupol would no longer officially belong to Naftogaz but would have to belong to a new subject under the control of, for instance, the DPR and LPR. Then Gazprom would have to obtain the legal possibility of signing a contract for the supply of gas to Donbass.

There is a major contradiction here. In fact, Kiev will not give Donbass independence. And Russia will not insist on it, recognizing that this is exclusively the internal affair of a different state and therefore not planning to interfere in it.

A cold winter in Donbass

Gas aid to the DPR and LPR is an expensive proposition. According to the evaluation of Yuri Korolchuk from the Energy Strategies Institute (Ukraine), 6 billion cubic meters may be needed by the population and industry, considering the stoppages of many enterprises, for the heating season (from October through April).

Meanwhile the underground storage facilities in the region contain 1 billion cubic meters of gas. Thus, Donbass needs to buy 5 billion cubic meters that will cost – based on the price of $385 per thousand cubic meters – $1.9 billion. Ukraine itself was planning to but 4 billion cubic meters in total this winter.

Moreover, Kiev claims that Donbass owes Naftogaz $308 million. “The debt was accumulated by the budgetary enterprises and population of Donbass during the previous 2012/2013 heating season and the heating season of 2013/2014 which ended in April,” explains the Ukrainian expert Yuri Korolchuk. According to him, Donetsk has always been the largest debtor. “This is a longstanding domestic story in Ukraine,” says the Ukrainian expert. In his opinion, once Ukraine considers Donbass its territory, then it will have to supply gas to the region.

The Director of the Energy Development Fund Sergey Pikin thinks that Gazprom may help the DPR renovate the gas pipeline just out of a sense of brotherly aid, but again only at the request of Naftogaz and based on a contract with the Ukrainian company.

This is an abridged version of an article, first published by Vzglyad.   

All rights reserved by Rossiyskaya Gazeta.

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