Democracy Watch, 2012 - Issue 3

FOR IMMEDIATE RELEASE
(Free-Press-Release.com) January 27, 2012 -- A new gas deal approaches…

2012 was welcomed with intense gas negotiations going on between Ukraine and Russia. The current state of play appears to be heading toward a considerable decrease of the Russian gas price in exchange for control of a chunk of Ukraine's energy assets including the gas pipeline network and gas reserves. Both teams of negotiators have brought rather powerful arguments to the table. President Viktor Yanukovych, Prime-Minister Mykola Azarov and Yuriy Boiko, Minister of Fuel and Energy of Ukraine, underline that even with a discount the current gas price: 416 dollars per cubic meter as of the first quarter of the year, is unreasonably high. Ukraine can also search for alternative lower cost energy sources, increase the development of domestic gas to 22 billion cubic meters per year and thereby minimise consumption of Russian gas in 2012 down to 27 billion cubic meters(1).

The Russian side represented by Prime-Minister Volodymyr Putin and Olexiy Miller, Head of Gazprom, threaten to impose penal sanctions due to the low consumption of gas in 2011, which according to experts would cost Ukraine around 8 billion dollars. Russian negotiators say that a reduction of consumption down to 27 billion cubic meters is impossible; due to a pre-existing contract, which provides for the possibility of a reduction in 2012 to minimum of 41.6 billion cubic meters, as specified by Gazprom. Russia has also received a permit for the construction of the South Stream Gas Pipeline from Turkey(2).

With a new gas agreement between Russia and Ukraine coming, the European Union has reminded Ukraine of its obligations under the Energy Community Treaty, which the country joined on 1 February 2011. Günther Oettinger, EU Commissioner for energy, stated that the EU has agreed a joint strategy for the further integration of the Ukrainian energy market with EU and they plan to start implementation in the nearest future(3).

Thus, once again a gas issue is the determining factor for Ukraine’s future. This issue may decide whether Ukraine falls into political dependence on Russia or if its economy will collapse. History shows that gas negotiations often lack transparency. Ukrainians might well wake up to find out that they lost key energy assets, and that it is too late to change anything.
(1) http://www.pravda.com.ua/news/2012/01/13/6907944/
(2) http://www.bbc.co.uk/ukrainian/business/2012/01/120111_miller_boiko_gas_dt.shtml
(3) http://www.newsland.ru/news/detail/id/865899/

People First Comment: One has to ask the question why Ukraine is paying so much more for its gas than anybody else. Ukraine is Russia’s 3rd largest customer yet Ukraine is paying approximately $216 per 1000cbm (52%) more than China and $66 per 1000cbm (16%) more than the EU. The price that Ukraine pays does not include the transit costs and therefore the real differential with Europe is appreciably higher. Ukraine is Russia’s only client that is paying at this level, all the rest are closer to the price being paid by the EU. Whilst serious questions need to be asked as to why Mrs Tymoshenko, as then Prime Minister, agreed to be tied into such a one sided contract it would also seem logical to ask who was benefiting from such a high gas price today.

Gas has been the foundation of many a fortune in both Russia and Ukraine and without any degree of transparency it would be acceptable to believe that this contract is as dirty as all the rest. If this is the case then who, since Mrs Tymoshenko’s incarceration, is now benefitting and is this the real reason why Gazprom appears to be playing such hard ball.

It is much quoted that Gazprom have their sights set on the Ukrainian gas transit system but this does not make sense as Europe is set to cut its consumption of Russian Gas from 80% to 30% by 2020 and this is precisely the volume capacity of the brand new Nord Stream pipeline. So one has to ask why Russia would want an ageing pipeline network that needs billions in investment when by the time the refurbishment is completed there is unlikely to be a customer at the other end. Perhaps this is just another diversion to stop people asking too many questions.

Eastern Ukraine holding politicians to account

Early in January the people of Donetsk, natural comrades of the President and the Party of Regions, again demonstrated that their attitude towards the current government has substantially changed. This time they have been distributing posters in public places that list unfulfilled election promises with "not executed" stamps. Every poster has a verdict on the bottom: "fire this official on grounds of incompetence". Some posters read "stone is the weapon of the proletariat" hinting perhaps, that the protection of rights requires the use of force. The people in of eastern Ukraine are starting to prove their civic awareness. They have started to compare promises with actions, putting aside regional solidarity. Activists distributing posters say on the Internet that their goal is to break through the unquestioning support of current government by the people of Donetsk(4).

Donetsk authorities are worried, not because of the anti-governmental posters directly, but because they do not know who the initiators are. They encourage open dialogue with the government. The Committee of voters of Ukraine has stated that more and more civic groups in Ukraine are demanding that the governing authorities be held to account for the election promises they made. Back in 2010 the High administrative court of Ukraine refused to declare unlawful President Yanukovych’s inactivity regarding his election promises; a case that arose from an action filed by an opposition member. The court overruled the action against the President as nothing more than agitation(5). At least we can commend the people of Eastern Ukraine for pushing through regional solidarity and starting to voice criticism of parliamentary actions.
(4) http://www.pravda.com.ua/news/2012/01/9/6896231/
(5) http://www.radiosvoboda.org/content/article/24447940.html

People First Comment: You can fool some of the people some of the time but you can’t fool all of the people all of the time… Unfortunately for the President and his team he was too convincing in his speeches to the good people of Donetsk and they followed his every word believing that their man would lead them to Nirvana. Today the reality is slowly sinking in. There is no Nirvana… there is no golden future, it was all just a front designed to enable Mr Yanukovych to win the Presidency.

The people of Donetsk are as a woman scorned, they are not going to accept excuses or apologies. He has betrayed their loyalty and their trust and that is unforgivable. Donetsk like any mining city is a hard place where communities exist through a close brotherhood. It is this brotherhood that has enabled them to live through the hardship and the loss common to mining communities. It is not a brotherhood you betray no matter how powerful you believe yourself to be. If the President does not find a way to appease this anger then the miners and steel workers of the Donbas could well be the seeds of his downfall.

Democracy Watch     People First Foundation     Victor tkachuk