Gazprom's Medvedev on Ukraine gas crisis

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Gazprom's Medvedev on Ukraine gas crisis

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In 2006 the first gas crisis between Russia and Ukraine seemed to have ended with a lasting solution. But three years later the crisis resurfaced. What lessons have the participants learned from the confrontation? What guarantees are there that it won’t happen again? Having previously interviewed Ukraine’s president, Euronews spoke to Russian energy giant Gazprom’s Deputy Chairman and exports Director-General Alexander Medvedev:

Euronews Gazprom says the Ukrainian company Naftogaz blocked Russian gas deliveries to Europe, on what does it base that argument? Medvedev They’re not arguments but facts. As of 31 December, we could not finalise a contract on gas deliveries with Ukraine, with Naftogaz. They unilaterally quit the negotiations on 31 December, on the direct orders of President Youchenko, in spite of the fact that the basic conditions of the contract has been discussed and approved. But nevertheless, from 1 January, Gazprom fed gas that was destined for European consumers into the Ukrainian gas system. We noted that on the night of 5 January, three main export gas pipelines: Urengoi-Pomari-Ujgorod, Souz and Progress were cut definitively by Ukraine, unilaterally and without any warning to us. That’s why, when our chairman, Alexei Miller met with Prime Minister Putin to update him on the situation, the prime minister asked him: ‘What do you suggest, what can we do?’ The chairman answered: ‘We don’t see the sense in continuing to feed gas into the Ukrainian gas system, because, in any case, it’s not reaching our European customers. Euronews During the crisis who made the decisions – Gazprom’s management or the Russian government, which is the company’s main shareholder? Medvedev The main questions were sorted out between the Ukrainian and Russian prime ministers – Timochenko and Putin – after final work on the contracts was done by the Gazprom and Naftogaz professionals. I am not a politician, and it’s not entirely appropriate for me to comment on President Youchenko’s declarations that this contract is economically disadvantagous to Ukraine. And it was even more amazing to hear it said that the basic price is 450 dollars and that that price doesn’t exist in Europe. Most of our European partners are paying, in the first quarter, definitely more than 450 dollars, never mind Ukraine’s special price, which is 360 dollars. Euronews What were Gazprom’s losses during the crisis in January and who has to cover those losses? Medvedev There is more than two billion dollars that has not yet been collected for exported gas. And we are now calculating the financial consequences of the shut down of certain wells, of redirecting flows inside the country, of refilling underground gas tanks, all of that has cost us. And we reserve the right to ask for compensation for our losses through international arbitration, we’re currently prepare evidence and documentation. And naturally, we will need to be reimbursed by those who caused this situation, that is Ukraine. Euronews Are you concerned about legal actions by the customers for Russian gas? Medvedev So far there’s been nothing of that sort. In addition we’ve reached the conclusion, with the majority of our customers, that they suffered no damage, precisely because we worked together; when – due to our joint efforts – we were able to maintain full pressure in the Yamal-Europe and Blue Stream gas pipelines, and we don’t expect any serious action against us from our customers. Euronews During the crisis, the Union European said Russia can’t be considered a reliable supplier any more. What is Gazprom going to do to counter that view? Medvedev These declarations seem enigmatic to us; we greatly value our reputation. For more than 40 years we’ve provided gas to Europe and we have everything necessary to ensure that the 21st century is the century of natural gas. And we will fulfil our obligations, which is why these declarations are baseless. We did everything necessary to ensure that this crisis didn’t blow up and then to overcome it. But the positive outcome is that it created a more reliable delivery system, because we have signed two long-term transit and delivery contracts, for a period of 11 years each. Euronews What guarantees are there this crisis won’t be repeated? Medvedev The guarantee is the contracts signed by Ukraine. We hope that – despite their making lots of noise about questioning these contracts – actually there are no reasons for Ukraine to be dissatisfied with them. Moreover, Russia has put forward initiatives, which Gazprom supports, to create international mechanisms aimed at averting and overcoming such risks. It’s not just about political quarrels, which was what caused the crisis in January 2009, but there can also be technical human errors or natural events that put supplies at risk, and don’t forget the possibility of terrorist attacks. All the more so as, unfortunately, the European Energy Charter has proved to be ineffective. And in spite of the fact that Ukraine has signed and ratified this charter, it has failed in its obligations within the framework of the Energy Charter. Euronews When do you think gas will start flowing through the Nord Stream pipeline (via the Baltic Sea), and will your South Stream or rival Nabucco be the first pipeline operational? Medvedev For Nord Stream, we’re planning gas deliveries starting in 2011. And provided there are no political delays, we’ll have all the necessary authorisations this year and will begin construction of the underwater section of gas pipeline and the part through Germany within the timetable envisaged. As for the South Stream project (under the Black Sea to Italy) this isn’t a race and it’s not a question of who crosses the finishing line first. But by contrast, unlike Nabucco, we have all the necessary elements: gas in the necessary quantities, that is for the entire duration of the project, and we’re already negotiating long term contracts, and, most importantly, we have the technological and management experience to carry out such projects. For that reason I want to wish the shareholders of Nabucco good luck, but we will follow our own path.