Russia House

editorial

2017-08-18
Air Force Chief: Israel Has Attacked Syrian Arms Convoys Nearly 100 Times in 5 Years
Brags That Many of Israel's Attacks Go 'Under the Radar'

By Jason Ditz
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2017-08-18
President TrumpТs СWhite BlindnessТ

By Robert Parry
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2017-08-18
Russia-US cooperation in space must be pragmatic and without sanctions - senior official
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2017-08-16

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2017-08-16
Russia Seeks to Convince Iran to Remain in Nuclear Deal
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2017-08-16
Is 'Putin's Russia' responsible for the Ku Klux Klan?

By Bryan MacDonald
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2017-08-15
The Costs of Ignoring Russia
Current mutual hostility threatens an explosive confrontation.

By Dimitri K. Simes
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2017-08-15
Russia-gate's Fatally Flawed Logic
By pushing the Russia-gate "scandal" and neutering President Trump's ability to conduct diplomacy, Democrats and Congress have encouraged his war-making side on North Korea

By Robert Parry
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2017-08-15
'US campaign in Afghanistan has failed, troops should leave' - Russian envoy
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2017-08-14

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Russia House

2017-08-07

On Russian Gas Front, Germany Does Ukraine No Favors

By Kenneth Rapoza

Ukraine's biggest fear, as vocalized by the CEO of its most important state owned enterprise, Naftogaz, is Russia bypassing its traditional gas transit route in Ukraine in favor of north European pipelines. Late last month, the Supreme Court of the European Union lifted its ban on Russia's Gazprom from using the 290 mile long OPAL pipeline in Germany. The Russians keep getting improved options to bypass Ukraine.

The ban, which was temporary imposed by the court following a dispute by Poland claiming Russians had too big of a market share, did not hurt Gazprom all that much anyway. Now that it is open, Gazprom is increasing deliveries, but not expected to break current demand trends for Russian gas. The trend still favors European demand for Russian natural gas, regardless of the E.U's role as Ukraine's white knight.

What's worth pointing out here is that Germany is not the least bit interested in roadblocking Russian access to European gas markets. On one hand, it flies in the face of the European Union's united front against the Kremlin's support of anti-government rebels in Ukraine. Europe is supposed to be punishing the Russians for breaking up Ukraine into autonomous republics in the east. But their most powerful nation, Germany, continues to give Russians ample alternatives to punish Ukraine for turning Westward instead of Eastward by using natural gas as a way to pressure Kiev. Ukraine has always been a key transit route of Russian gas into Europe. That is changing fast. Ukraine does not like the idea.

Since the six month ban was lifted, Gazprom's gas transit through the OPAL pipeline gave it its leadership position again with some 40% of the pipeline's capacity in Russia's hands. Gazprom deliveries went from 56 million cubic meters per day under the ban to 71.5 million cubic meters per day post-ban, according to pipeline operator OPAL Gastransport. Meanwhile, Russian gas deliveries through Ukraine's pipelines into eastern Europe fell slightly.

This is a sign of things to come for Ukraine. OPAL connects to the Nord Stream pipeline which leads to Russia via the Baltic Sea.

German oil firm Wintershall is partnering with Gazprom to finance Nord Stream's sister pipeline called Nord Stream II. Pipe will be laid right alongside the existing Nord Stream line.

"This is all politics," Andriy Kobolyev, Naftogaz's CEO told me a few months ago. "If Nord Stream II is built and you add Turkish Stream to that too then it is clear that Russia will use them instead of Ukraine's transit system, denying us and the country hundreds of millions of dollars in transit fees." Gazprom is partnering with BOTAS Petroleum of Turkey to build another pipeline system through the Black Sea. This is another alternative to Ukraine.

According to Slovak pipeline operator Eustream, Russian gas transit via Ukraine fell by around 8 million cubic meters from 161 million to 155 million on Aug. 3.

Ukraine has been pulling away from Russian gas following legal disputes with Gazprom. The two countries have been at loggerheads for the past three years, leading to sanctions on Russia by Brussels and Washington.

Ukraine is still clawing its way back from political crisis which saw its President Viktor Yanukovych ousted following popular protests in February 2014. Last year, the country's highly unpopular Prime Minister Arseniy Yatsenyuk stepped down.

Ukraine has become the poster child of Russian encroachment into European politics, something that has served the interest of a number of politicians in the U.S. and Europe who have taken to blame Russia for a number of anti-establishment failures over the years, not the least being Brexit and the election of Donald Trump.

Gazprom's access to OPAL has been a matter of controversy since the 2009 passing of the so-called Third Energy Package by the European Commission. The Package does not allow single suppliers to dominate the market. As it is, Russia accounts for at least a third of all foreign gas imports into the E.U., with the bulk of it going to Germany.

But on October 28, 2016, the European Commission agreed to exempt OPAL from the Third Energy Package until 2033, citing energy security matters. By doing so, they increased the quota of Gazprom and gave them a much larger position in the spot market traded on the PRISMA platform, Europe's leading gas trading system. The move gave Russia greater leverage to ship gas into Europe via OPAL, counting for the vast majority of the pipeline's shipping capacity today and for the foreseeable future.

Sadly for Ukraine, even with what amounted to a clog in the drain for Gazprom gas going through OPAL, Russian gas to Europe in January stood at around 19 billion cubic meters, or 26% more than Gazprom deliveries recorded in January 2016.

In the first half of the year, Gazprom exported 95.6 billion cubic meters of natural gas via OPAL, or 12.6% more than the same six month period last year. That doesn't mean Ukraine is obsolete, despite the narrative that Nord Stream II will put Naftogaz and, by default, Ukraine, six feet under.

Transit through Ukraine rose by 21.8% to 45.7 billion cubic meters, according to Naftogaz. And they did this without relying on Russian gas, either. There is hope for Ukraine, especially if it develops its own untapped natural gas resources.

Still, energy experts believe that with OPAL's floodgates now open to Gazprom, it could allow the publicly traded Russian gas giant to sell another 14.6 billion cubic meters this year.

Meanwhile, transit capacity via Ukrainian pipelines are under-utilized as Russia turns elsewhere, Alexander Sobko, an energy analyst at the Skolkovo Business School told the Vedomosti business daily yesterday. "The new export volumes via OPAL will more likely be due to a redirection of gas transit rather than to new export records," he told the paper.

OPAL is designed to handle 36.5 billion cubic meters per year.

"Forbes.com"