EU speaks out on Gazprom's threat to cut gas to Ukraine

By bne IntelliNews October 3, 2007

Mike Collier in Jurmala, Latvia -

Not known lately for its straight-talking over Russia and its energy policies, the EU came out strongly against Gazprom's threat on Tuesday, October 2 to cut gas supplies to Ukraine over unpaid bills, linking it directly with the elections in Ukraine that were won by the pro-Western Orange coalition.

At a meeting of the so-called "3+3 group" of Baltic and Benelux states held in Jurmala, Latvia on Wednesday, October 3, all six representatives agreed that mixing strategic and economic interests was now a fact of life in dealing with Russia.

Asked about Gazprom's threat to cut supplies to Ukraine for an alleged unpaid gas bill of $1.3bn, Latvian Foreign Minister Artis Pabriks said: "I think maybe I can speak for all of us. We briefly discussed this new information - there is no doubt that energy plays not only an economic but also a political role in the 21st century Russian-EU relationship. I think the EU has to be ready for such issues in the future as well, and I must say that this discussion between Russia and Ukraine is at least partially connected with the recent elections in Ukraine."

With 98% of the vote counted, it appears the parties of Yulia Tymoshenko and President Viktor Yushchenko have scraped in with a simple majority, defeating the pro-Russian party of Viktor Yanukovych. This means that Tymoshenko will almost certainly return as prime minister. The return of Tymoshenko as premier, a post she held briefly in 2005, was always expected to strain relations between Kyiv and Moscow, as she has strongly criticised Russian influence in her country, and Moscow at one time had a warrant out for her arrest on charges related to bribing Russian defence officials while she headed Ukraine's main gas distributor, the now-defunct United Energy Systems.

United front

The Jurmala meeting is part of an initiative by some of the EU's smaller countries to present a united front not only to Russia's increasing use of its energy as foreign policy weapon, but also to demands from some of the EU's larger member states that they should have their voting power reduced.

However, the problems associated with adopting a common energy policy with regard to Russia became apparent when bne asked if unity was possible on issues such as Gazprom's controversial Nord Stream gas pipeline, which Russia and Germany plan to run below the Baltic Sea. The Benelux countries stand to enhance their energy security by plugging into a direct supply of gas from Russia, but the Baltic states and Poland would be bypassed, allowing Russia to restrict supplies if it so desires, without affecting delivery into the industrial heartland of Western Europe.

Dutch foreign minister Maxime Verhagen gave the official EU line. "In general, we in the European Union should deal with energy security and energy supplies for the future. We need an energy policy as such in the European Union. It is one of the issues that must be dealt with not only on an individual basis, but also in a European approach," he said.

But even Verhagen's reply had become somewhat equivocal by the end. "Regarding the Nord Stream line, in general it is possible for member states to have conflicts with suppliers, but there should be guaranteed supplies for all members of the EU including the Baltic states, and that's where we need an energy policy. I'm not against the Nord Stream pipeline, but I'm in favour of energy solidarity and energy security for all the member states," he said.

Paet expounds

Estonian foreign minister Urmas Paet was much more explicit, characterising Nord Stream as a deeply flawed project. "The political reasons were more important than the environmental ones. We find that this is not correct and that is why Estonia finally did not give permission [to Nord Stream] to investigate the Estonian economic zone in the Baltic Sea," he told bne.

On September, the Estonian government officially turned down the request from the Nord Stream Company to survey the Baltic seabed in Estonia's economic zone, infuriating Moscow.

"We have always said that it was not correct how this project was started, that it was discussed only with some countries around the Baltic Sea and not with all," Paet said, alluding to the fact that Nord Stream only contacted the Estonian government in its unsuccessful attempt to carry out a seabed survey after Finland raised objections to the original route.

"There are lots of environmental concerns because we all know that the International Maritime Organization declared the Baltic as a fragile sea area, and that's why we find that it was not correct not to investigate real alternatives to this route. The main alternative was not investigated and the main alternative should be on the mainland, not in the Baltic Sea," Paet said.

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EU speaks out on Gazprom's threat to cut gas to Ukraine

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