New Ukraine-provoked gas war coming

According to information updated exclusively by RT, despite Russia making advances, gas payment delays are likely to continue from Ukraine in the near future – and thus a new gas war will be its fault.

At the moment, relations between Russia and Ukraine regarding the paying for Russian natural gas intended for Ukraine's home use look as follows.

Ukraine has paid $200 million for gas supplied for its home consumers and paid $400 million for the pumping of gas into its underground gas storage facilities. Where did Ukraine get that $400 million? It's the money that Russia had paid in advance to Ukraine for the transit of its gas to European costumers for the entire year of 2009. Russia made a concession to Ukraine there. However, this June, July, and August, Ukraine still has to pump another 19 billion cubic meters of gas into its gas reservoirs in order to get through the winter. This amount of gas is worth $5 billion. At the same time, the Ukrainian part suggested that Russia pay for the transit of its gas to European consumers for the next five years in advance (ca. $5 billion). That money would allow Ukraine to buy gas for its underground storage facilities for 2009.

As Russian Prime Minister Vladimir Putin noted, "These are great risks for Russia". We might expand on that by saying that the risks are not commensurate and impossible, especially considering the upcoming elections in Ukraine and the inevitable change of government. This is especially true given the fact that, even now, the position of the Ukrainian leadership on such payment models is far from consolidated (see V. Yushchenko's words that he is against such a payment model). Besides, the Brussels Declaration expressly says that Ukraine is going to establish a new operator in the gas industry (read instead of Naftogas). But then, who is going to be responsible for the $5 billion credit that Ukraine is requesting?

It’s worth mentioning that after the signing of the Ukraine-EU gas declaration, Russia has put forth a proposal to the European Union as the representative of the key Russian gas consumers, to credit Ukraine. We have also mentioned our willingness to contribute to it. But according to the well-known statement of the EU Financial Services Commissioner, the EU has no extra funds for Ukraine since all additional financial support of the current budget has already been distributed between the Eastern European members of the Union.

As for the International Monetary Fund, it has been lending money to Ukraine but exclusively to support the country’s currency and not for its budget spending. It is clear that the IMF gives Ukraine no internal gas credits as the gas in question is being sold to economic consumers and the population at an understated cost. During its internal negotiations with Ukraine the IMF said: “Raise the consumer gas price three times and then we’ll talk credit”. Of course, doing that in the pre-election period would be the end of the career for any Ukrainian politician.

Thus, the problem is as follows. Ukraine has no money to pay for the underground gas storage pumping. Ukraine has no money to pay for the Russian gas to satisfy its internal needs. It is very likely that the country won’t be able to pay in May, not to mention June. Taking into account the fact that, in the case of a one-month payment delay, the Russian-Ukrainian agreement gives the Russian side a clear right to demand the payment for the current month as well as a prepayment for the upcoming one – the outcome of such a situation is obvious. This is yet another gas crisis which is Ukraine’s fault.

It is vital to understand that we are talking about today’s or tomorrow’s situation. Unfortunately, it is real. Ukrainian politicians prefer to conceal it from the public for obvious reasons, and this is wrong. People must know everything.

Is there a solution to this? Of course there is, but it is Ukraine’s problem. The country can accumulate internal funds (which is one big question), obtain financial support from the EU or the IMF (which is unlikely), or pay with its property (like Belarus), but doesn’t want to.