Ukraine, EU, and Natural Gas
Ukraine-European Union Relationship: Natural Gas Obstacle
November 26, 2014
This article has been produced by the efforts of the following members:
Kevin Lass – Primary Article Contributor
Martin Eidenberg – Team Leader following Ukrainian Democracy
The European Union has recently focused its efforts to increase integration with Ukraine. Since February 2005, the European Neighbourhood Policy has set the foundation for gradual economic and political cooperation without the need for membership. By 2012, the Ukraine-European Union Association Agreement was set to provide Ukraine preferential access to EU markets, extend free trade, and advance financial support. Despite these benefits and promises, former President Victor Yanukovych refused to ratify the agreement that would force the country to embrace European standards. This inevitably led to the Euromaidan, a series of protests insisting for closer ties with the European Union, and dissatisfied with widespread government corruption, violation of human rights, and abuse of power in Ukraine. Eventually the provisions were signed by newly elected President Petro Poroshenko on June 27, 2014, and have recently come into effect on November 1, 2014.
The European Union fears that imports of natural gas in particular are threatened by Russia. The Russian state-owned gas company, Gazprom, halted natural gas deliveries to Ukraine after its newly elected government refused to pay the inflated price and previous debts in June. With Russia supplying 50 percent of Ukraine’s gas and 23 percent of European Union's gas, these regions currently remain inextricably linked. Moscow demanded that the new pro-Western government in Kyiv pay sharply higher prices for new delivery. Finland, Estonia, Serbia, Bosnia-Hercegovina, and Macedonia, along with much of the EU, are also very dependent on Russia’s natural gas. As requested by Gazprom, Brussels is helping Kyiv finance the initial 1.45 billion dollar deliveries in advance.
With Ukraine reliant on natural gas from Russia, there is limited economic and political realignment that Ukraine and European Union can achieve. Several European Union countries have passed portions of their gas supply to Ukraine through a process known as reverse flow. However, Russia constantly threatens to cut the supply of gas as warning signals to neighbouring countries that assist Ukraine without Moscow’s permission. Although gas supplies from Russia have resumed, future prices remain uncertain and very unstable. European Union energy chief Guenther Oettinger is confident that Ukraine will have the finances required to pay for needed gas. With natural gas production in Europe on decline for more than a decade, the European Union currently does not have the necessary energy resources that would be required for Ukraine to further distance itself from Russia. Thus, dependence on Russia's state-owned natural gas has risked economic prosperity in Ukraine, further political integration with the European Union, and may have potential implications on sovereignty as well.
