Independence costs a lot, but dependence always costs much more

Posted by Borys Kushniruk on 19/01/14
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Minister of Energy and Coal Industry of Ukraine Eduard Stavitskyi declared that at this stage Ukraine intends to import natural gas only from Russia and not carry out import in the reverse mode from Europe, as the price of the Russian gas is lower.

A similar step of the Ukrainian government arouses double feelings.  It is obvious that the gas price offered by Russia now is much lower, than the price of spot gas at the European market in the winter period.  And from this point of view to buy this gas now is indeed inappropriate.

At the same time, Ukraine has already experienced the period of cheap Russian gas when it seemed stupid to buy it in other countries.  But dependence on one gas supplier is always dangerous.  At some point the monopoly supplier will wish to increase the price significantly to the level which will be absurdly high.  And there will be no more choice. And the buyer will be compelled to buy it, incurring unbelievable losses.

The monopolist, however, may look like a “philanthropist”. Suggesting thus to sell him some strategic enterprises or, for example, a national gas transport system. Exactly this was the way in which some countries of the former Soviet Union remained without their own GTS. They passed under the control of the Russian gas monopolist.

Cheap gas from the monopolist is the same thing as a free first portion of drug offered by the drug dealer. But having tried it, the person becomes drug addict, and afterwards is willing to pay already anything to get the next portion.

Therefore, to become dependent on one gas supplier is extremely unwise.  And Ukraine had an opportunity to feel this on its own experience.

It’s no coincidence that non-admission of receiving over a third of the general consumption of gas from one source is one of the basic principles of energy policy of the EU.  Such approach, quite probably, costs more expensive.  But under such circumstances it is already impossible to blackmail the EU countries, threatening them with a technogenic catastrophe.

It is necessary to recall that Ukraine faced exactly such blackmailing in 2006 and 2009.   And consequentially, we were compelled to make concessions to the gas monopolist. Yes, in both these cases the corruption component of the arrangements was not the last one. But corruption is the basis of energy dependence.

It’s clear that such poor country as Ukraine is right now and which, besides that, suffers from the economic crisis can’t constantly buy more expensive gas in Europe.  At the same time, it would be expedient for Ukraine to have arrangements with European partners concerning the possibility of the reverse gas supply from Europe.

At least in spring-summer period it can be completely favorable for Ukrainian business structures to buy spot gas and upload it into the gas storages in the Western Ukraine which are the greatest ones in Europe. In spring and in summer spot gas can be cheaper, than the Russian gas. Thus, in winter periods its remains can be rather favourably sold to European consumers at that same European spot market.

Under such circumstances, Ukraine can solve two tasks at a time. The first one is to reduce its energy dependence on Russia. And the second – is to use the capacity of the Ukrainian gas storages in full, earning on this.

 

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