Ukraine Ditches European Gas Imports

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Written by Martin Lynch, European News Editor for Industrial Info (Galway, Ireland) - Ukraine continues to strengthen its economic ties with Russia by announcing that it no longer wants gas imports from Europe.

Ukraine's energy minister Eduard Stavitsky has announced that the country will now only purchase its gas from Russia, after gas monopoly Gazprom (PINK:OGZPY) (Moscow, Russia) reduced the price of its natural gas for Ukraine by a third to $268 per thousand cubic meter (tcm). In 2013, the country had been paying around $400 per tcm but the preferential rate was proffered after Ukraine ditched the European trade pact.

The move follows the country's controversial and surprising decision not to sign a historic trade pact with the European Union (E.U.) towards the end of last year, which would have seen the country put some distance between it and its former Soviet ruler, Russia. Instead, the country is to become part of the Eurasian Pact, a Russian-led economic bloc. The decision helped spark two months of sporadic rioting against the government in the capital, Kiev.

Just two months ago, the E.U. had set out to help the Ukraine alleviate its historical gas problems with Russia's Gazprom by brokering a deal that would allow gas flows reversed through Slovakian pipelines into Ukraine. It would have reduced the price that the country pays for gas and also its almost total reliance on Russian gas imports. Russian-Ukraine problems over gas imports and unpaid bills have threatened gas security in Europe in the past, leading to drastic gas shortages throughout Europe in 2006 and 2009. Gazprom supplies a quarter of all the gas in the E.U.. For additional information, see November 22, 2013, article - Europe Ignites Ukraine Gas Import Deal.

The E.U. had already helped create reverse gas-flows to the country from Hungary and Poland. Although the gas, which originally came from Russia, was being sent back to Ukraine it was cheaper than the country was already paying Gazprom at the time. Almost 2 billion cubic meters (bcm) of natural gas was exported to Ukraine by Hungary and Poland last year.

Despite Gazprom being the dominant exporter of natural gas to Europe it has an uneasy relationship with the authorities like the European Commission (E.C.). In October last year, after a year of investigation, the Commission announced that it was preparing charges against Gazprom relating to the company abusing its dominant position in central and eastern Europe. It was alleged that the company could be facing charges related to price fixing and restricting trade. For additional information, see August October 11, 2013, article - E.U. Readies Charges Against Russia's Gazprom.

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