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Putin — Tymoshenko Gas Deal: What is really in there? - УКРАЇНСЬКИЙ РАЦІОНАЛЬНИЙ НАЦІОНАЛІЗМ [entries|archive|friends|userinfo]

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Putin — Tymoshenko Gas Deal: What is really in there? [жовтень. 21-е, 2011ΨΨ12:10 pm]
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25.05.2011 Borys Kushniruk 15:53 Газові угоди: про що домовлялися Путін і Тимошенко

Tymoshenko and the authorities imagemakers exhibit unprecedented activity on the gas contracts. Some engaged in bleaching, other - on the contrary… What really happened in January 2009?…

Trying to rewrite history is not unusual. This happened ever since the Roman Empire, and possibly earlier. Historical events drown in fabrications, myths turn into “facts” and the reality is either forgotten into oblivion or is framed into something completely different… In the past, as a rule, what was rewritten dated back decades or even centuries.

In our time the same is done, only modern public-relations experts sometimes rewrite the very recent history — what has happened just yesterday or even today…

One prominent example — gas deals signed under pressure from then-Prime Minister Yulia Tymoshenko by Naftogaz management in January 2009. Mrs Tymoshenko and the present authorities imagemakers demonstrate unprecedented activity on this recent event. Some are engaged in artful whitewashing, others — in the opposite direction… Furthermore, the government drives the this subject to distract public attention from their own actions as well as those deals — are very far from the interests of Ukraine.

Tymoshenko's arguments

In recent weeks BYuT imagemakers made following arguments against accusations on gas contracts.

Mr. Yushchenko and Mr. Firtash hampered and got in her way, she was under pressure by Europeans and Russians, she had no choice, therefore she had to sign whatever there was to sign. During the Tymoshenko's government (in 2009) the average gas price was $ 228 per thousand cubic meters, and this year (2010), during the reign of Yanukovych, could reach $ 300 per t.c.m.

At the same time we are told that these contracts are market-based in general, and therefore are fair, and could not be better.

But if the contracts are indeed market-based, then what for are all the complains that someone was hampering or pressing?

Are gas contracts market-based?

In reality the claim that the contracts from January 2009 are market-based does not stand any criticism.

This was a contract between two monopolies, one of them actually is a monopoly on gas transportation from Russia to Central and Western European countries, the second is a monopoly on Ukraine's gas supply. Both are linked to one chain and will depend on each other long enough. Because of this, gas contracts were largely determined by who and whose interests protected during negotiations and the arguments that were used to do so.

It is obvious that the formula that was choosen to calculate the prise under sonsent of Mrs. Tymoshenko is completely incorrect, to say the least. And given that the former “gas princess” understands very well what prices on the gas market are, it simply impossible to explain this failure by her lack of experience.

This incorrectness is felt throughout, from the use of gasoil in the formula, which is not used in Ukraine. According to the European practice of such agreements the formula should include the types of energy consumed in the country, where gas is supplied. In the case of Ukraine has to be oil, fuel oil, coal, but not gasoil.

In addition, the formula should take into account the volume of gas consumed. Obviously, there can not be the same price for consumers who buy several billions and tens of billions of cubic meters of gas, especially when it comes to the biggest foreign customer of Gazprom. Large consumer always has a system of discounts and benefits from the seller. But in our case this is not reflected in the price formula from Tymoshenko.

An important factor that affects price is the time of delivery. If Gazprom has to deliver gas in the autumn-winter period, it is clear that the price has to be one. But if the country buys gas in advance, solving the problem of limited consumption in spring-summer period (extraction process is continual, so gas has to be stored somewhere) — it is clear that the price has to be lower.

And if we recall that the formula does not account for the distance (which in the Ukrainian case is the smallest), to call the contracts standard, fair, and the more beneficial would be simply absurd, and blunt mockery.

Especially absurd is that the gas price for Ukraine was almost the highest among all Gazprom buyers.

The same applies to gas transportation tariffs. We are told as well that the gas transportation tariffs are standard and market-based, but we are not told why they end up being several times lower than in other European countries.

Also in the agreement of 2009 stipulated the principle of take or pay, Naftogaz must pay for the gas that it even does not consume. At the same time there are no corresponding obligations on Gazprom to Naftogaz is not provided.

As we see, we are dealing with two totally incorrect contracts that inflicted and continue to inflict multibillion losses on Ukraine. And it is an undeniable fact that can not, despite all BYuT imagemakers efforts to somehow reframe and present as positive for Ukraine, although this is what they are doing for many consecutive months.

On the other hand, it is worth to understand, what led to the signing of such contracts, were they forced or, perhaps, were a result of consistent and determined efforts by both sides?

How Yushchenko got in her way

To understand how this statement is justified, chronology of events at the end of 2008 has to be recalled.

As of December 17, 2008, Gazprom and Naftogaz had no contracts to supply gas to Ukraine in 2009. Never mind that according to the memorandum of Heads of Governments of Ukraine and Russia, signed on October 2, 2008, transition to direct long-term relations between Gazprom and Naftogaz was scheduled on January 1, 2009. However, the memorandum demanded complete payment by Naftogaz of all existing debts for gas supplied. And this key requirement of the memorandum by the Ukrainian government was not bein fullfilled. As of December 16 Naftogaz did not even pay for gas delivered in September and October 2008.

And “guilty” is not a government of Yulia Tymoshenko and Naftogaz, but President Viktor Yushchenko. The “guilty” was forced to personally intervene in the process of payments. After negotiations with representatives from IMF a decision was made that this will be done at the expense of reserves, which made for the refinancing of the Savings Bank, which, in turn, gave credit to Naftogaz.

As of December 18 Yushchenko was confident that the issue was settled. Naftogaz has paid off the debt for gas supplied in September and October 2008, and Ukraine has no overdue debt settlements with Gazprom. “So now the question is resolved,” — he then said.

However, Gazprom on the same day made a statement that starting from 1 January 2009 gas supplies to Ukraine can be halted.

“After paying Gazprom $ 800 million for gas supplies Ukrained stated that she will not pay this year for gas supplies (for November-December)” — Gazprom spokesperson reported to the mass media.

And further: “given the fact that debt for gas supplies will not be paid down, it will be impossible to switch to direct contract between 'Naftogaz Ukraine' and Gazprom from January 1, 2009.”

“Thus, without a contract for gas supplies, starting from January 1, 2009 Gazprom may stop gas supplies to Ukraine” - massmedia quoted him saying.

This situation with payment being uncertaint remains until 30 December.

Attempts to negotiate with Russia about payments for gas supplied by Gazprom in November-December, lead to nothing.

“Attempts to reach an agreement with Ukraine on the issue of gas debt payment were not succesful” — said then the prime of Russia Vladimir Putin.

“I just talked with Viktor Andreyevich (Yushchenko) for almost an hour — without an agreement yet” — Putin announced on December 29, 2008 in Moscow.

Asked why there was no agreement, Putin replied: “they do not want to pay.”

Given such a dire situation, “chief guilty” Yushchenko held a meeting on December 29 with the head of the National Bank of Ukraine Stelmakh and Minister of Finance Pynzenyk. As a result a decision was made: Naftogaz pay for its obligations again with the Central Bank reserves.

“Thanks to the coordinated efforts and actions by the President, the government, 'Naftogaz' and National Bank, Ukraine has fully paid for imported Russian gas in 2008” - it was noted in the press report from the President. - “Ukraine paid not only for deliveries in November, but made an advance payment for December 2008. Thus all obstacles to concluding mutually constructive agreements with Russian partners on imported natural gas supplies to Ukrainian consumers in 2009 are removed.”

So why was there such a situation with payments in December? Why Naftogaz and the Government took the decision to increase the volume of gas purchases in the last months of 2008, realizing that in a falling economy and reduced gas consumption there will be no money to pay for it?

Answers to these questions can be found in the comments made by Viktor Yushchenko at that time:

“The problem is that this year the government decided to accumulate the largest gas reserves ever. Obviously, the logic was that the gas price next year is unknown, it may be even higher. It is reasonable to pump gas at a price of $ 179.5 into the storage and cover the consumption balance in 2009… The deal is good and is ideal if the gas supplied is paid as a seasonal demand. The problem with the the government and Naftogaz is that it has accumulated seasonal gas that was not consumed and that no one paid for… This gas was taken when the gas on the market was not bought. And thus were given jobs, including in Russia, for those in gas extraction. But it's emotions. I am convinced that for every cubic of gas Ukraine should provide a payment.”

This explanation by the President was published in the media. I a slightly different explanation why the head of the government made all these actions, but I'll tell it a bit later…

If one agrees with Yushchenko's reasoning, the question arises: what Mrs. Tymoshenko thought about, when she decided to purchase the gas in advance? She could not be unaware that Naftogaz and the Government can not pay for it. And apparently this decision was made by Tymoshenko and not Naftogaz. Such important decision are made at the level of leadership of the government rather than state company management.

At the same time representatives of the Russian government and Gazprom in the second half of December 2008 have repeatedly stated very confidently that Ukraine does not pay for gas, so supply will be halted or, at least — will be carried out based not on a direct contract between Naftogaz and Gazprom. However, since November 2008 emissaries of the Russian government left to the European capitals, where they strongly urged their counterparts that in January Europe might have problems with gas supply and it will be the fault of Ukraine.

What an amazing foresight, you know.

And one can only wonder who should bear responsibility for the cessation of gas supplies on 1 January because of nonpayment of debts for purchased gas? Is it President again?

Yushchenko withdrew from the talks the head of Naftogaz

One of the most compelling evidence of the President Yushchenko's guilt, as Mrs Tymoshenko and all her propaganda machine claims, is that on December 31, 2008 Yushchenko withdrew Naftogaz head Oleg Dubina from talks in Moscow.

You can look on all Internet forums that witnessed extraordinary surge in activity of BYuT activists just after the information (leaked from the Prosecutor General Office as it is claimed) that Oleg Dubina confirmed this on confrontation testimony with Tymoshenko. Although I am confident that this information hit the media from the sources in BYuT. There they do not seem to quite understand what it is it and thought that this “leak” is playing in favor of Tymoshenko and discredits Yushchenko.

But quite the opposite.

The information itself is not new. That Dubyna was withdrawn became known on December 31, 2008. According to media reports, former head of Naftogaz testified that in late 2008 Tymoshenko and prime minister of Russia Vladimir Putin have agreed to sell gaz in 2009 at $ 235 per t.c.m.

It should be noted that in all statements that were made before 31 December 2008 the Russian leadership named another price — not $ 235, but $ 250. Even before the contracts were signed in January Putin in an interview with editors of leading German media said: “I personally invited the Prime Minister of Ukraine: come, sign the contract with $ 250 per thousand cubic meters, and we will give you the right to re-export. And she refused”.

But lets suppose that this was true. In public it was said that the price will be $ 250, whereas informally Putin and Tymoshenko agreed price of $ 235 (for the supply of gas in 2009 only).

A small comment is needed here…

Firstly, as of December 31, 2008 Naftogaz had no debts to Gazprom, and therefore would act rules named in the memorandum signed between the Government of the Russian Federation and the Cabinet of Ministers of Ukraine on cooperation in gas sphere of October 2, 2008. The memorandum provided for a phased transition over three years to market-based, commercially reasonable and mutually agreed upon price for Russian natural gas for consumers in Ukraine and transit fees over Ukraine.

One might ask whether the average price of $ 235 corresponds to this document? Hardly so. If you even go out of the odious formula that was laid in a contract for the supply of gas, excluding the 20 percent discount provided for 2009, the average price would be around 270-280 dollars. Can it be claimed that 235 dollars is a “uniform” first (three years) stage from the price of 179.5 to 280 dollars? And if it is not exactly uniform price increase, then why in spite of the memorandum, signed by Putin and Tymoshenko directly, these same people were prepared to sign a contract for gas with an average (in 2009) price of $ 235? And at the same time gas transport tariffs had to remain unchanged in 2009 — $ 1.7 per t.c.m. per 100 kilometers. But according to that same memorandum, transit tariffs had to be gradually raised to the european level.

So both of them were not going to follow this part of the memorandum as well. And if everything is clear with Putin, the question arises: why did Tymoshenko supposedly agree with it? I write “supposedly” because sure it is those arrangements that were in fact between them. They were, in the best case, were presented to Dubina, who could report them to Yushchenko.

Real intentions of the both premiers will be discussed below. And here we will discuss the reasoning of Viktor Yushchenko, who, according to Oleg Dubina, did not agree with the terms of contracts and withdrew him from negotiations.

So, Naftogaz proposed to buy gas from Gazprom at $ 235, also without changing the transit fees. Could Yushchenko agree on that option, understanding the destructive nature of this price for the whole Ukrainian economy and Naftogaz?

228 or 233?

It has to be recalled that the average gas price in 2009, paid by Naftogaz, has reached 233 dollars.

This is despite the fact that Mrs. Tymoshenko and all BYuT propaganda machine asserted multiple times that the average price in 2009 was $ 228. Although during the last trial of ex-Prime still reported that according to the certificate of commission checks on specific issues of financial and economic activity of “Naftogaz Ukraine”, which was provided on behalf of the current government leadership and Naftogaz, the actual average prices for 2009 year amounted to $ 232.98 per t.c.m.

It is quite obvious that this figure was not a secret for Tymoshenko during her premiership. And she told Ukrainians a lie. But it is so, by the way…

Let's return to the role of Yushchenko in this story.

Economic Implications

Because of the gas contracts operating deficit of Naftogaz in 2009 was estimated by the IMF representatives around ₴ 22 billion. The overall deficit around ₴ 60 billion. And its losses before taxes on the basis of consolidated financial statements based on international standards for 2009, published by Naftogaz, reached ₴ 19.5 billion.

And here we talk about Naftogaz only. And one must account for the losses of other companies associated with the spike in gas prices during the economic crisis, falling demand for Ukrainian products, and the losses for the state budget and population - the total impact of such a gas price for Ukraine is difficult even to estimate.

Could President Yushchenko, with estimated calculation of the consequences for the Ukrainian economy of gas prices around 250 dollars, agree to it? It is clear that he could not. It is possible that it was anticipated and even expected to by our Russian-Ukrainian “sweet couple.”

Yushchenko's position on gas contracts for 2009 was made January 1, 2009 the first in a joint statement, Yushchenko and Tymoshenko about supply and transit of Russian gas.

In particular he states: “According to our calculations, based on the memorandum in early 2009 the price of Russian natural gas for Ukraine at the Ukrainian-Russian border should be $ 201 for 1 thousand cubic meters, the rate of transit over Ukraine - no lower than $ 2 per 1 thousand cubic meters per 100 kilometers. The proposed suggestion by the Russian Federation to raise gas prices to $ 250 including a sharp drop in world oil prices means for Ukraine average European prices for natural gas. At the same time the Russian side proposes keeping the transit at $ 1.7, more than twice lower than rates on average.”

What counted upon Yushchenko, when he offered Tymoshenko to sign this statement? Obviously, he thought that in the gas contracts the Ukrainian government should have a consolidated position, aimed at protecting the interests of Ukraine. In addition, given the filled gas storage facilities, he believed that Ukraine's position is strong as never in many years. With gas storages filled with enough gas for almost six months, Ukraine was in much better situation than Gazprom. Naftogaz developed technological procedures and was able to pump in the reverse gas pipeline system and provide Ukrainan consumers with gas.

Instead, Gazprom, which was pressed in the last months of 2008 with a significant decline in demand for gas not only in Europe but in Russia itself had no where to store extracted gas. In addition, responsibility for the supply to European consumers relied on Gazprom and not on Naftogaz, so that Gazprom had to deal with disruptions with contractors. So, the reasoning of Viktor Yushchenko, all played for the strong position of Ukraine in negotiations with Gazprom. He and his team have appreciated all this. Please do not take into account that their partner in this struggle for national interests is the Prime Minister of Ukraine Yulia Tymoshenko. And her personal interests are quite different.

And speaking of guilt of Viktor Yushchenko, it is just that, defnding Ukrainian interests, he forgot what games he is playing. He had to remember and consider how close were already at that time relations between Putin and Tymoshenko.

In fact they beat Yushchenko's very easy. However, the main loser was and remains a nation that pays the loss of income, rising prices, loss of sovereignty over part of the territory of the Ukrainian state.

To be continued.

See also

More information on this topic