Opinion: Ukraine brings dumping to EU

By Anna van Densky, Brussels

Kiev’s rejection of gas prices of $365 suggested by Energy Commissioner Gűnther Oettinger brings to an end long negotiations between Gazprom and Ukraine that have been facilitated by the EU. Ukraine did not budge an inch from its initial position:  $265 per thousand cubic metres, which would also allow them  to recalculate the amount of current gas debt of $4.5 billion. However, the exceptionally low price pursued by the government of seven oligarchs would cause distortion of  economic competition for neighboring EU countries, which pay substantially higher prices. This self-serving move will not make Ukraine many friends in the EU, which is concerned with dumping.

Gazprom  has set 16 June as the new deadline for settlement of the debt. If the undisputed part of the payment does not arrive in Gazprom's bank account by that date, the prepay mechanism will be switched on, which will mean the disruption of gas supplies to Europe. The international pressure on Russia is immense – the South Stream pipeline construction was frozen upon the request of Commission President José Manuel Barroso amid Gazprom’s negotiations with Ukraine, supporting its near-monopoly position in the transportation of Russian gas. Reportedly, the move will be discussed during the upcoming European Council of 26-27 June.

Certain southern European countries, such as Greece and Italy, in need of  vital energy supplies for economic growth,  disagree with the sacrificing of the pipeline, which contradicts  the core EU energy policy of diversification of gas routes .

Why abandon the strategic energy route, which saves EU economies four billion dollars per year in transit fees? The rejection by Ukraine of the ‘fair price’ proposed by Oettinger means the continuation of a battle that is damaging the weakest economies,  primarily Bulgaria, the gas supplies of which are totally dependent on Ukrainian transit. Ironically, Bulgaria rejected the construction of the South Stream through its territory, preferring the total gas dependency offered by Ukraine.

It looks like the new Ukrainian leaders inherited their predecessor’s tactics in attempting to squeeze the most out of East and West: both the cheapest Russian gas supply and the benefits of the EU Association agreement -  in either case, they tend to forget that the respective interlocutors have their interests as well.  The association agreement with the EU also means following solidarity ethics, although it might be at odds with the Ukrainian oligarchs’ usual tough style – they have to comprehend that rapprochement with Europe can not translate into a struggle with the EU energy policy represented by Oettinger.

Ukrainians can ignore the interests of Europeans and go on gambling, hoping for the jackpot – the war of nerves is nothing new for them, as disputes with Gazprom are a regular feature of Ukraine's existence in the post-Soviet era, when the government, enchanted by its own powers over transit, has established the notorious formula ‘no gas for Ukraine, no gas for Europe’.

The abuses of its near-monopoly position in the past has always led to victory, as Russians had no other choice but to agree to debt clearance in order to avoid damaging their image in the eyes of Europeans.

It is obvious that Russians will have no choice but to go the same way, forgiving debt and giving the desired lowest gas price. A few dramatic days like the 2009 winter dispute will not be felt with the same intensity in June, and moreover Europe has learned the lessons of the past and prepared itself for this kind of incident.

However, this distortion of competition and sacrifice of the alternative gas route in the long term will be badly felt by member states. In case Marine Le Pen becomes the next president of France, she should certainly send a thank you card to Ukrainian PM Arseniy Yatsenyuk for bringing to life the worst fears of the Europeans  –  dumping from the East.

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