alleviating the eu’s rocky road: a firmer kiev-moscow partnership ahead?
DESCRIPTION
Konstantin Simonov’s speech presentation at The Brussels Energy Club Brussels, Belgium, February 05, 2014.TRANSCRIPT
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‘Alleviating the EU’s rocky road: a firmer Kiev-Moscow partnership ahead?’
Konstantin SimonovKonstantin Simonov
BREC BREC
BrusselsBrusselsFebruary 5February 5
20142014
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TThhrreeee whales of whales of Ukrainian CrisisUkrainian Crisis
••European European phobiaphobia concerning concerning Russia Russia
••Russian Russian imperialimperial syndromesyndrome••Ukrainian Ukrainian slynessslyness
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No No gratitudegratitude
Discount for Ukraine
0
100
200
300
400
500
Average price for Russian gas in 2013 New gas price
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No No gratitudegratitude
Nafrogaz Debt (bilion USD)
2,7
0,65
0
0,5
1
1,5
2
2,5
3
3,5
4
1Naftogaz debt forJanuary, 2014
Naftogaz debt for 2013
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Ukrainian Stubbornness Ukrainian Stubbornness
New Version of Energy Strategy New Version of Energy Strategy –– 2030 2030 (January, 2014)(January, 2014)
•• Increasing of domestic production (60Increasing of domestic production (60--95% of local gas in Energy balance in 95% of local gas in Energy balance in 2030)2030)
•• Decline of dependence from RussiaDecline of dependence from Russia•• Import from Import from AzerbaijanAzerbaijan, Qatar and Egypt, Qatar and Egypt•• Reverse from Europe Reverse from Europe
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Stupid Policy Stupid Policy
••Ukraine has strong need to save Ukraine has strong need to save transit business and transit business and induceinduceRussia to revise the capacity of Russia to revise the capacity of South Stream South Stream
••Instead of it Ukraine is try to Instead of it Ukraine is try to scare Russia with paper tigersscare Russia with paper tigers
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Ukrainian Transit in Ukrainian Transit in GazpromGazprom’’ssExport to Europe & Turkey, %Export to Europe & Turkey, %
95
82
70
66
6967
5652
40
50
60
70
80
90
100
1998 2002 2008 2009 2010 2011 2012 2013Source: NESF (based on figures of Gazpromand Naftogaz of Ukraine)
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Gas Transit across Ukraine in 1998Gas Transit across Ukraine in 1998--2013, 2013, bcmbcm
3 3,2
114,9 110,7 109,3 105,3 106,1112,4
120,3 121,5113,8 112,1
116,9
92,2 95,4101,1
81,2 83,9
26,214,6
11,319,1 15,5 16,8 16,8 14,9 14,7
3,1 2,7 3,1 3,1 2,20
20
40
60
80
100
120
140
1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013
Russia and Moldova Europe
Source: Naftogaz of Ukraine
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Transit of Russian Gas to Transit of Russian Gas to Europe and Turkey, 2013 Europe and Turkey, 2013
23%
9%
15%2%
51% BelarusBlue StreamNord StreamFinlandUkraine
Source: Gazprom
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Gas in UGS of Ukraine Gas in UGS of Ukraine
Source: NESF Calculation
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Gas Balance of Ukraine Gas Balance of Ukraine
20,924,4
51
118,1
0
20
40
60
80
100
120
140
1991y 1995y 2000y 2005y 2006y 2007y 2008y 2009y 2010y 2011y 2012y 2013y
ProductionConsumption
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National Idea National Idea
•• The thesis about The thesis about ““gas independence from gas independence from RussiaRussia”” is typical of the current Ukrainian is typical of the current Ukrainian elite and is not disputed. The protests only elite and is not disputed. The protests only increase the increase the ““gas pridegas pride”” sentiment with the sentiment with the idea like idea like ““we do not need Russian gas at allwe do not need Russian gas at all””
•• This is becoming almost part of a This is becoming almost part of a ““national national liberation struggleliberation struggle”” for for ““independence from independence from MoscowMoscow””
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ByeBye--Bye, Transit!Bye, Transit!
•• Even if we will see presidential election in 2015 Even if we will see presidential election in 2015 it is impossible for Viktor it is impossible for Viktor YanukovychYanukovych to let to let GazpromGazprom have the pipeline, as even without have the pipeline, as even without that the opposition almost calls the current that the opposition almost calls the current Ukrainian leader Ukrainian leader ““a Moscow puppet,a Moscow puppet,”” which is which is absolutely wrong in essence, yet resonates absolutely wrong in essence, yet resonates strongly with the Ukrainian massesstrongly with the Ukrainian masses
•• The surrender of the pipeline in this situation The surrender of the pipeline in this situation may lead may lead YanukovychYanukovych to lose not only power, to lose not only power, but also personal freedom (if he is sent down but also personal freedom (if he is sent down the way the way YuliyaYuliya TymoshenkoTymoshenko was, charged with was, charged with abuse of power or even high treason)abuse of power or even high treason)
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In In Third PackageThird Package We Trust!We Trust!
•• Another form of playing up the subject of Europe is Another form of playing up the subject of Europe is discourse of the Ukrainian gas establishment and expert discourse of the Ukrainian gas establishment and expert community on Ukrainecommunity on Ukraine’’s presidency of the European s presidency of the European Energy Community and on Ukraine implementing Energy Community and on Ukraine implementing provisions of the Third Legislative Packageprovisions of the Third Legislative Package
•• The idea is that the Third Legislative Package will enable The idea is that the Third Legislative Package will enable Ukraine to remove legal risks when organising virtual Ukraine to remove legal risks when organising virtual reverse supply from Europe. Also, it will at least provide a reverse supply from Europe. Also, it will at least provide a new plausible ground for accusing Russia of new plausible ground for accusing Russia of unwillingness to go the way of unwillingness to go the way of ““civilised nationscivilised nations”” and and adopt liberal standards for regulating the gas business adopt liberal standards for regulating the gas business and gas pipelines in particular (for instance, to allow and gas pipelines in particular (for instance, to allow transit of some gas from Central Asia to Ukraine)transit of some gas from Central Asia to Ukraine)
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Destruction of good Destruction of good buisnessbuisness
Naftogaz Transit Tariffs
2009 2010 2011 2012 2013 Revenue from transit,
billion USD 1,5 3,1 3,6 3,2 3,6
Volume, bcm 92,2 95,4 104,2 84,3 86,2 Transit Tariffs ($ for 100 km) 1,7* 2,65 2,8 3,1 3,4
Source: Naftogaz, NESF
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Pipelines in MuseumPipelines in Museum
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Nord Nord StremStrem, Opal and Gazelle, Opal and Gazelle
Source: Net4gas
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The role of South Stream The role of South Stream
Source: Gazprom
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Austria, Slovakia and PolandAustria, Slovakia and Poland
National Energy Security FundNational Energy Security Fund Source: Gazprom
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Ukrainian Gas ImportUkrainian Gas Import
27,732,9
44,8
0
5
10
15
20
25
30
35
40
45
50
2011 2012 2013*Source: Ukrainian National Source: Ukrainian National OfficeOffice forfor NationalNational StatisticsStatistics
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Reverse is not the solutionReverse is not the solution
Reverse in 2013, million cubic meters
0
50
100
150
200
250
Janu
ary
Febru
aryMarc
hApri
lMay
June Ju
ly
August
Septem
ber
October
Novem
ber
Decem
ber
Poland
Hungary
•• Average price Average price –– 397$397$
Source: Ukrainian National Source: Ukrainian National OfficeOffice forfor NationalNational StatisticsStatistics, , GazGaz SystemSystem, , FGSZFGSZ
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NaftogazNaftogaz on the way on the way to bankruptcyto bankruptcy
Share of low-profitable consumers in Naftogaz Sales
57%
75%
0%10%20%30%40%50%60%70%80%
2011y 2013y
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Ukraine is Already Divided Ukraine is Already Divided
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Thank you! Thank you!
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