Page 6 - FSUOGM Week 17 2021

FSUOGM COMMENTARY FSUOGM

tariffs be increased to market rates, a demand the Imported gas and Nord Stream 2
Ukrainian government vigorously resisted for Russia is still sending a significant amount of gas
several years. However, the reform was eventu- through Ukraine to Europe, but Ukraine itself
ally pushed through and remains highly unpop- has cut imports of Russian gas for its own use to
ular; so unpopular that Zelenskiy’s government zero. Ukraine has not imported gas from Russia
recently reduced the prices again “temporarily” for more than three years and has turned to part-
due to the coronacrisis and unusually cold win- ners in Western Europe for the approximately 30
ter. Zelenskiy’s ratings in the polls has been flag- bcm of gas imports a year it needs.
ging recently but the president has earned some The problem is that this gas is more expensive
brownie points from voters with this and other than the gas Ukraine could import from Russia,
populist moves. but in fact Ukraine would end up spending the
The introduction of competition in the retail same amount if it bought the gas directly from
market will also help finally kill off another scam Russia.
that was used by oligarchs; heavily subsidised “The problem is, there is only one Russian
gas earmarked for residential customers was company to deal with,” says Makogon. “Why
re-routed and sold to the oligarch-owned indus- would Gazprom charge less when there is no
trial assets, thereby reducing their costs and one else to deal with on the Russian side? If they
boosting their profits. let the other Russian companies export gas there
“Now retail and industrial prices are more might be a chance to do a deal, but Gazprom has
of less the same,” says Makogon. “It is no longer a monopoly on exports.”
possible to manipulate the market, as the differ- Gazprom only accounts for about half of gas
ence is so small.” supplies on the domestic Russian market and has
Firtash is still in a dominant position on the to compete with several other big players such
retail market and what competition has been as the state-owned Rosneft and the privately
introduced into the retail business has helped, owned Lukoil at home so Russians also bene-
but GTSO says that the price of gas for the con- fit from a competitive internal market. But the
sumer is still high, as the suppliers are not reduc- state-owned gas behemoth is the only company
ing their prices. It is hoped that throwing the allowed to export gas.
market open to even more competition this year This set-up is one of the foreign policy tools
will make a bigger impact. the Kremlin uses to manage relations with its
Naftogaz will help drive this process, as the neighbours in the Commonwealth of Independ-
national gas company is also expanding its retail ent States (CIS). Good relations come with cheap
operations, adding a retail sales arm to its opera- gas prices; in the noughties Belarus used to pay
tions. The company has already seen its share of a quarter of the price Ukraine was charged and
the residential gas supply market increase from still enjoys preferential rates today.
4% a few years ago to 12% now and its share con- Despite Ukraine’s massive overcapacity, Rus-
tinues to grow fast. sia has decided to build Nord Stream 2 with a
Ukraine’s power companies are also getting capacity of 55 bcm that will, if completed, allow
into the residential gas supply business. Gazprom to cut Ukraine out of the transit loop
“It will be easier for them, as they are already completely; 55 bcm is exactly the amount that
set up to do this business,” says Makogon. “They Ukraine transited to Europe last year.
already have a business relation with the con- While Ukraine has cut its own imports of
sumers, the local offices and all the payment and Russian gas to zero it has been lobbying hard to
back office set-up they need to operate.” keep the transit business, which is worth some

P6 www. NEWSBASE .com Week 17 28•April•2021