Ukraine-Imposed Sanctions to Hurt Europe

Ukraine-Imposed Sanctions to Hurt Europe

The Ukraine's parliament has passed legislation that would allow the government to impose sanctions on Russia. It provides for sanctions against 172 individuals and 65 entities in Russia and other countries for supporting and financing «terrorism» in Ukraine. President Poroshenko has not signed it into law as yet, but the transit of Russian gas to Europe through the territory of Ukraine is in jeopardy. The bill covers transit pipelines and underground gas-storage facilities, as well as flights and ground routes. A ban on Russian gas transit has a price tag of 7 billion dollars but it the fact does not make the Kiev-based regime stop and think things over. 

The bill evokes concern in Brussels. The Russian gas transit via Ukraine accounts for around half of Europe’s gas supplies going to 15 countries. Some of them depend on Ukrainian pipeline deliveries 100%, like Bulgaria, for instance. The European Commission said it would share its concern with the Ukrainian government. 

It’s clear what Ukraine wants to achieve. By storing enough gas for winter Kiev runs the risk of losing billions of dollars. The existing accord with Gasprom does not allow doing it, Kiev cannot store the transit gas, and large-scale reverse from Europe would also violate the accord’s provisions. So Ukrainian Naftogas has come up with a plan to make Gasprom activities forbidden on Ukrainian soil. In this case the terminals would be relocated from western to eastern border making Ukraine establish full control over gas exports. The accords in force allow for reverse flow (it was reduced twice in July) using auxiliary pipelines and «virtual reverse» by buying out European gas to be taken out from transit. The reverse supplies have certain limits agreed on, so buying gas out cannot solve the Ukraine’s problems. 

It may make the European Union want to get rid of unmanageable transiter and finally approve the construction South Stream going around the Ukraine’s territory. The situation puts into doubt the expediency of the EU Third Energy Package which actually bans Russia from using the existing pipelines while other suppliers have reduced capacity for filling the pipes. That’s what Gazprom CEO Alexei Miller said at the company’s annual general meeting of shareholders. According to him, the Russian gas company has increased the supplies to Europe by 16, 3%. As he told shareholders, «We increased gas supplies to Europe by 16.3 per cent compared to last year. We achieved such a result while other suppliers reduced their deliveries, i.e. Qatar – by 20.7 per cent, Nigeria – by 38 per cent, Algeria – by 19 per cent, the UK – by over than 6 per cent and Norway – by almost 5 per cent. We managed to increase our export supplies, despite a fall in annual European gas consumption, which averaged 1.5 per cent per year during the past three years». Miller said that Gasprom is the leading European supplier, «In 2013 Gazprom's share in the European market was as follows: over 30 and 64 per cent in terms of gas consumption and import respectively. We have to deliver all the projects aimed at diversifying export routes in order to carry on our mission of being European gas supplier No. 1».

Despite the controversy over the prospects for South Stream, Gerhard Roiss, chief executive of OMV – which in June reached a deal with Gazprom to extend South Stream from the Hungarian border to OMV’s gas hub outside Vienna – said he did not expect the project to be undermined, and that any delays would be manageable. «Nobody can tell you not to build a pipeline. It’s a matter of national law... Everybody can decide for themselves», he said. «A pipeline is a 50-year project, so one should look at things realistically... A few months is not an issue».

But the European pragmatic approach is not hailed by Ukrainian politicians and their supporters. The West still sticks to old thinking and outdated approaches treating Russia the same way it did it the XX century. In his article How to Bring the Ukraine Crisis to a Peaceful End published by the Financial Times Quentin Sir Rodric Braithwaite, former UK ambassador to Russia wrote «The crisis in Ukraine has stirred ancient suspicions of Russia in the west, and barely rational cold war passions on both sides. Western policy has become a mere knee-jerk escalation of sanctions». But knee-jerks are not good for good diplomacy; the art of foreign policy requires state-level thinking and the ability to see many years ahead, much farther than the coming winter.