NATURAL-GAS TRADE BETWEEN RUSSIA, TURKMENISTAN, AND UKRAINE: AGREEMENTS AND DISPUTES

1. Since independence, Ukraine’s dependence on cheap natural gas, either from Russia or at least transited through Russia, in combination with Russia’s need to export natural gas to western Europe, has consistently caused disturbances in the relations between the two countries.
2. Russia depends on Ukraine, for the transiting of natural gas primarily aimed for Europe but also to some extent for moving natural gas into southern Russia and the Caucasus.
3. Turkmenistan remains a major supplier of gas to both Russia and Ukraine, regardless of its deals with China.
4. The trade in natural gas between the three countries has been characterised by opaque relationships, secret contracts, and hidden beneficiaries, which, most observers conclude, has engendered substantial corruption, with serious losses to both the Russian and Ukrainian states as well as consumers and shareholders there and elsewhere in Europe.
5. Contrary to the view common in western media, it is Russia’s gas export monopoly Gazprom that since about 2002 has aimed at introducing businesslike practices in the trade relationship, while various Ukrainian interests have striven to retain opacity and procedures not open to scrutiny.
6. Russia and Turkmenistan have agreed on a new, market-based pricing mechanism for export gas from 2009 onwards.
7. The introduction of export prices aligned to those being paid elsewhere in Europe will not immediately help Ukraine solve its chief problem: an obsolete, energy-inefficient heavy industry sector that depends on imports of cheap natural gas.

 
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