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Ukraine and Shell inked $10 bln shale gas deal

Jul 20, 2013

ukraine20and20shell20gas20deal_0Today I decided to dedicate my post to the usually tensed Russo-Ukrainian gas relations. This year also brought us some interesting developments in gas deals between Russian Gazprom and Ukrainian Naftogaz. Recently, an agreement on exploration and production of shale gas in Ukraine was signed in Davos (Switzerland) between multinational Royal Dutch Shell oil company and Ukrainian state-owned Nadra Yuzivska LLC. The agreement stipulates that each party will have 50% interest during 50 years while involving $10 bln in investments. The significance of the agreement can be proved by the presence of Ukrainian President Viktor Yanukovych and Dutch PM Mark Rutte during the signature ceremony.

Just after this event the Russian Ria Novosti news agency said, quote: “Gazprom bills Ukraine $7 bln for unused gas”. What? For unused gas? Kind of a nonsense. Actually, it’s not a nonsense in Russo-Ukrainian relations. Such an agreement was signed by former Ukrainian PM Yulia Tymoshenko and currently she’s in prison serving her 7-year-old sentence.

The 2009 gas agreement was permanently disputed by the Ukrainian authorities. Russia understands that Ukraine strives to guarantee its own energy security and independence from Russian gas supplies, and so Kremlin used its ‘gas’ leverage. As it was the case in 2009 gas war when Russia cut off the gas supplies to Ukraine and the European Union, Russian authorities lied that it was Ukraine who cut off the gas. But, as it was later proved by the European Union delegation who came to Ukraine and to Russia to examine the situation stated that Ukraine has no physical possibility to cut off the gas, because such possibility exists on the Russian territory only. Also, it was noted that Russia uses its gas to put pressure on Ukraine and to influence its political decisions. Even now, Russia didn’t change its behavior towards its southern neighbor – Ukraine.

It’s clear enough that the Government of Ukraine will never recognize such formula: “To pay for unused gas”. And now, should Ukraine together with the EU prepare for the new gas cut offs from Russian side? I don’t think so.

Russia tries to change Ukraine’s geopolitical choice and uses all possible leverages in order to drag Ukraine into the Russian arms, which, nowadays, represented by the Customs Union (Belarus, Kazakhstan and Russia). Since early 2000s when Putin came to power in Russia he sleeps and dreams to re-create some sort of the USSR. Russia created bunch of different and, I’ll permit myself to say, useless, international organizations such as: Commonwealth of Independent States (CIS), Collective Security Treaty Organization (CSTO), some other minor economic organization and finally, new Russian creation – Customs Union.

From what I see, I can say that Ukraine drifts from the European integration choice towards Russian block, let’s call it so. Unfortunately, the European Union shows weak political messages and absence of political will inside the EU to forge closer ties with Ukraine. Russia, while observing such geopolitical situation becomes more aggressive and understands that if Ukraine signs the Association Agreement with the EU there will be no more room to drag Ukraine into Russian block. So, it’s natural, that Russia uses the momentum and tries to do its best.