Michael MacKay, Radio Lemberg, 04.03.2018
The Russian invaders of Europe in Ukraine are threatening to make Europeans “freeze in the dark.” But Ukraine has a plan that will keep natural gas flowing and save the rules-based energy market in Europe at the same time.
Russia’s Gazprom must pay Ukraine’s Naftogaz $2.56 billion. This is the decision of a tribunal of the Arbitration Institute of the Stockholm Chamber of Commerce rendered on February 28. Gazprom could have decided to participate in the rules-based European energy market and pay Naftogaz the award. Instead, the Putin regime decided to start a gas war with Ukraine and the rest of Europe.
Gazprom is both a financier and a weapon of Russian aggression against the West. Gazprom announced that it would not respect the ruling of the Stockholm Arbitration Tribunal and it would not pay the $2.56 billion that it owes to Naftogaz. Without any announcement, Gazprom reduced the pressure of the natural gas it was feeding into pipelines which transit Ukraine – which it is contractually obligated to maintain. Gazprom announced that it was tearing up all its contracts with Naftogaz. By using gas blackmail, the Putin regime expected to bully Ukraine into submission, or to cause Ukraine cut the gas supply to down-the-pipeline customers in the European Union and thereby make Ukraine appear to be the ‘bad guy.’
Being a coward and a bully himself, Putin had no idea that Ukrainians would respond with courage, resilience, and moral integrity. Putin suffered a shocking and massive loss in the first round of the gas war he started. Ukrainians undertook huge conservation measures in domestic consumption of natural gas, made deals for diversified supply with other European partners like Poland’s PGNiG, and maintained contractually-obligated pressure for down-the-pipeline customers in central and western Europe. Ukrainians showed they would rather freeze than give in to Russian blackmail.
Russia is setting itself up for more defeats as it persists in its gas war against Ukraine and against Europe. Ukraine is entitle to collect on the $2.56 billion arbitration award. More than that, Gazprom must pay half a million dollars in penalties for every day that it refuses to abide by rules-based conduct of the energy market. The Ukrainian government has announced that it will seize Gazprom assets wherever they may be found – as it is perfectly entitled to do if Gazprom will not pay the Stockholm Arbitration Tribunal award in money. One of these assets is the natural gas in the transit pipelines in Ukraine. Naftogaz has made it clear that is easy to ‘arrest’ the Russian gas that is supplied to the EU. Naftogaz would do this not to stop the flow of gas to Germany and other countries, but to keep the gas flowing by having Ukraine sell it on the open gas market. Naftogaz Chief Commercial Officer, Yuriy Vitrenko, was asked on Ukrainian television if Russian gas could be ‘arrested.’ Vitrenko said: “The same with Gazprom’s gas supplied to Germany. Germany is a liquid gas market. We take their gas, sell it on the stock exchange and get money. That's all … it's so easy.”
If Russia through it’s Gazprom weapon continues to attack Ukraine and the Stockholm Arbitration Tribunal then it will lose Germany and other EU countries as a customer for natural gas. Ukraine is proving to be a resilient, dependable, and rules-abiding partner as a source and as a transit country for natural gas for Europe. Russia is proving to be a brittle, unreliable, and rules-breaking blackmailer who uses natural gas as a weapon of war.
Russia is invading Ukraine in Crimea and Donbas and is at war with the whole European Project of peace, unity, security, and democracy that has evolved since the end of the Second World War. The Putin regime has lost the first round of the gas war it started using its Gazprom weapon. It will lose the next round if it persists, when Ukraine ‘arrests’ and then sells and continues to supply Russian gas as payment of the Stockholm Arbitration Tribunal award. The final defeat for Russia in the gas war it started will come when Gazprom’s Nord Stream 2 pipeline project – which is nothing but a weapon to attack Ukraine and destroy Europe’s energy security – is cancelled.