Gas War Hurts Bilateral Relation of Russia and Ukraine

Natural gas negotiation between Ukraine and Russia, which has been lasting for months, finally broke down on 16th. Gazprom announced that it will implement advanced payment policy for Ukraine's oil and natural gas companies. This policy means that Russian will stop gas supply if Ukraine rejects to pay or repay prices according to the quotation of Russia.

 

At present, risks of gas disruption in Ukraine have not emerged apparently. Gas is supplied for citizens’ daily life as usual. Ukrainians don't worry about gas supply or have any panic. Gas dispute has repeatedly occurred between the two countries. In response to the possibility of dispute, Ukrainian authorities have begun to decrease the volume of imported natural gas from Russia year by year. The government also increases the storage of natural gas and expands gas imported sources to reduce the dependence on Russian gas. Besides, pressure of gas supply is not high in summer.

 

Although the influence of gas disruption is temporarily not apparent, more than 90% of Ukraine's gas is from Russia. Especially during gas peak period in winter, Ukrainians will surely be tough to spend bitter winter without enough gas supplies. Ukrainian authorities have begun to take measures to seek energy supply security for this.

 

From the past experience, confrontation is a double-edged sword which may hurt both sides. Thus compromise is the only way out. For Russia, gas disruption does not conform to its own interests because energy export is its main source of foreign exchange eventually. Gas disruption not only damages Russia's economy but also affects the energy cooperation and economic relations between Russia and the EU. And for Ukraine, Russia's natural gas is still indispensable even various measures are taking. Ukraine's gas imported from Russia last year reached 27.4 billion cubic meters, still significantly higher than domestic natural gas exploitation.

 

Besides, Ukraine is difficult to get the cheap gas currently. Final discounted price Russia offers to Ukraine' is $385 per thousand cubic meters. Ukraine said it can't accept the price. But Ukrainian media disclosed that average gas price from Europe was $376 per thousand cubic meters, very close to Russia’s. At least for the moment, the amount of natural gas from other channels is very limited and Ukraine still can’t stop importing from Russia.

 

Continued gas disruption certainly brings a negative impact to Europe's natural gas supply and energy security. The EU puts pressure on Ukraine and Russia and requests to solve the dispute as soon as possible for its own interests. Under the pressure from international political pressure and domestic economy, Ukraine and Russia are likely to find a compromise in the near future.