Expert: Ukraine needs to prepare for the end of the transit of Russian gas | Economy in Germany and the World: News and Analytics | Dw

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“End of Russian Gas Transit. Challenges for Ukraine”. This is the title of a scientific article by Professor Heiko Pleines, Deputy Director and Head of the Politics and Economics Department of the Center for Eastern European Studies at the University of Bremen. It is published in a new issue of the bimonthly analytical digest Ukraine-Analysen. It is a joint project of six German research centers studying Eastern European countries. In an interview with DW, the scientist explained his point of view on the prospects of the Ukrainian gas transportation system (GTS) and gas supply to Ukraine.

German wave: Professor Pleines, in the Nord Stream 2 dispute, the European Union demands from Russia guarantees of the continuation of gas transit through Ukraine, and you publish an article about the end of this transit. Do you think that the EU will not be able to insist on its own?

Heiko Plaines: I am, of course, not a visionary, but a simple calculation shows that after the commissioning of Nord Stream 2, Russia will no longer need the Ukrainian gas transportation system, since other transportation capacities will be sufficient to export Russian gas. And even if a small, symbolic volume of transit remains – the head of Gazprom Alexey Miller spoke about 10-15 billion cubic meters a year – Ukraine will not benefit from this, because we are talking about about 10 percent of the GTS throughput. Then the question will inevitably arise whether it is worth keeping this system in its current form at all.

Nord Stream 2 is a geopolitical and economic project

You are now actually confirming the correctness of those who consider Nord Stream 2 mainly a political project.

Professor at the University of Bremen Heiko Plaines

– And Russia has never concealed that it wants to avoid transit through Ukraine. Here, of course, there is a geopolitical component, but there is also an economic one, since the Ukrainian GTS, built in Soviet times, is completely outdated and requires modernization. And in Russia it has been said more than once that it would be cheaper to build a new gas pipeline. But there is no dispute: the ultimate goal was to bypass Ukraine. That is why it should now stop relying on further transit of Russian gas.

Therefore, the title of your article is this is not so much a forecast as a call to tune in to a very likely scenario of the termination of Russian gas transit after, how the current five-year agreement will end at the end of 2024?

– Yes, in any case, it is necessary to prepare for the fact that the transit may stop. Even the current agreement was signed literally at the last minute.

Reverse deliveries will be required for gas supply to Eastern Ukraine

What exactly should Ukraine be tackling now?

– I see two key aspects. The first step is to provide conditions for the supply of gas to Eastern Ukraine. At the moment, Russian transit gas is being sampled in the east of the country, and the corresponding volume produced in Ukraine itself is being pumped in the west. In the event that Russian transit stops, technical preconditions are needed to pump gas eastward.

– You are not talking about the separatist territories now?

– No, they are supplied directly from Russia, I mean, relatively speaking, Mariupol.

In other words, Ukraine should take care of how it – purely technical – will deliver to the same Mariupol gas from Western Ukraine or, let’s say, from Slovakia?

– Exactly! The Ukrainian gas transportation system should ensure the possibility of reverse deliveries from west to east. The second key aspect: it is necessary to make a decision on the future fate of the excessively large gas transmission system, the maintenance of which takes a lot of money and for the maintenance of which technical gas is constantly required. One has to ask the question, is it not more profitable to start its partial dismantling?

“Ukraine’s gas transportation system should become more harmonious”

– Dig up the pipes and send them to be melted down?

– I am not sure that such utilization will bring great benefits, but, in principle, the task is precisely to make the Ukrainian gas transportation system more harmonious. And more efficient, reducing, for example, significant gas losses at outdated compressor stations. This is a long-term task, but we need to prepare a solution right now.

Infographics Gas pipelines between Russia and the EU

– And what do you think about the plans to reorient the Ukrainian gas transportation system for the supply of “green” hydrogen produced in Ukraine to Germany and other EU countries?

– In any case, these are plans for a rather distant future. In the more immediate future, a realistic option seems to be the use of Ukrainian underground gas storage facilities by EU companies, which would ensure regular loading of existing pipelines, at least in western Ukraine. The experience of recent months has shown that, on the one hand, the EU needs gas storage facilities in order to reduce its direct dependence on Russian supplies in winter. On the other hand, the same events indicate that the EU now lacks gas rather than storage capacity.

What conclusions follow from this??

– Ukraine is going to modernize its gas storage facilities, and this is correct if only because it itself will have to use natural gas for a long time. If we talk about the European gas market, then attempts to predict its development have so far almost always turned out to be unsuccessful, since it is influenced by too many factors that are difficult to predict.

European gas market: many factors that are difficult to predict

– For example?

– We do not know what the demand for gas in Germany and the EU will be, whether Nord Stream 2 will enter operation in full or in part, and whether it will work at all, whether Russia will stop Ukrainian transit, whether it will be able to produce significantly more gas, than now, whether a terminal for receiving liquefied gas will be built in Germany, how much will this reduce the importance of pipeline supplies.

– In such a situation, do you recommend that Ukraine focus on technical preparation for supplying Eastern Ukraine and on the development of plans for reforming the GTS with its excess capacity?

– And it has no other choice, since many factors affecting the gas market do not depend on it. And in Ukraine they understand this.

Has Kiev already begun to prepare for the end of Russian gas transit?

However, one gets the impression that at the moment Kiev is throwing all its forces into the fight against Nord Stream 2..

– If in Kiev they said “we do not want this gas pipeline, but if it goes into operation, we are already ready for this,” then from a foreign policy point of view, we would behave extremely awkwardly. If you are trying to prevent a project, you have to portray it as a giant problem.

You want to say, that in fact, behind the scenes in Kiev, they have probably already begun to actively prepare for the very likely end of Russian gas transit?

– Let me answer this way: at present, the statements of the Ukrainian side are clearly focused on the geopolitical aspect, and not on the economic and technical. These factors are not yet in the spotlight.

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