Martial law in Ukraine clearly showed that Kyiv had more tools and tactics against Russia. How fast the incident in the Sea of Azov grew into large-scale military preparations makes one think about the future plans of Petro Poroshenko, who is trying to retain power at any cost.
Martial law opportunities
The Decree of the Ukraine’s President reads that for the period of martial law, the rights of legal entities may be limited in accordance with part 1 of Art. 8 of the Ukraine’s Law “On the legal regime of martial law”. In some localities under martial law military administrations can:
- enhance security of important national economy facilities and facilities that provide essential services to the population, and introduce a special functioning mode;
- use the capacities and labor resources of enterprises, institutions and organizations of all forms of property to ensure defense, change their functioning mode;
- forcibly seize private or communal property for the needs of the state. To dismiss the heads of enterprises, institutions and organizations for improper fulfillment of the obligations specified in the law.
“Important national economy facilities and facilities that provide essential services to the population” include gas filling stations, oil and oil products warehouses, underground gas storage stations, gas pipelines and oil pipelines. This means that, theoretically, martial law may also affect the transit of Russian gas.
On November 30, Ukrainian Foreign Minister Pavlo Klimkin said that Kyiv will terminate about 40 agreements with Russia in the near future. Since 2014, Ukraine has already denounced the Treaty of Friendship with Russia, ceased cooperation in the military-technical and economic spheres, in the field of nuclear energy and broadcasting, canceled direct flights from the Russian Federation. Martial law, caused by clash of naval vessels, seems to be a compelling reason to terminate the agreement even in the gas sphere.
Officially, Ukraine stopped buying gas from Russia in November 2015 and switched to European supplies of blue fuel. However, gas is supplied to Europe by the very same Gazprom, so Ukraine simply receives it not directly, but through intermediaries. According to the head of Naftogaz, Ukraine used to pay $ 4 billion more for Russia’s gas than it received for transit. Now Kyiv allegedly receives $ 600 million more than it pays for gas imports from Europe.
However, after the ruling of the Stockholm court, which obliged Gazprom to reduce the price of gas, the same Yu. Vitrenko said the opposite that Ukraine overpays almost 34% for imported gas, buying it not in Russia, but in Europe.
The Stockholm Arbitration Court also ordered Gazprom to pay $ 4.63 billion for the short supply of gas under the transit agreement. Taking into account the debt of Kyiv, the amount was reduced to $ 2.56 billion. Gazprom refuses to pay this amount and resume supplies of blue fuel to Ukraine. This clearly shows what problems Kyiv is actually facing in the energy sector.
In the spring, Naftogaz recommended that the population and enterprises of Ukraine reduce gas consumption and lower their home heating. The government even adopted a special five-day crisis plan. President Poroshenko and the head of Naftogaz threatened the Russian company with the arrest of assets in Europe, including the Nord Stream 2 gas pipeline, against the amount of the fine.
It is interesting that in this case a cautious reservation was made that Naftogaz would not confiscate transit gas “as compensation”. However, this statement dates back to March 2018, when no one could have thought of imposing martial law. Now the situation has changed, and decisions are made in other offices.
What will Ukraine do?
To understand how Kyiv can act under martial law, let’s recall the gas conflict between Russia and Ukraine of 2008-2009. At that time, the contracts for the supply and transit of Russian gas through Ukraine expired, and the leadership of the two countries could not complete a new agreement. Ultimately, Gazprom cut off supplies to Ukraine, while the company continued to transit the necessary volumes of gas to fulfill its obligations to European consumers. Naftogaz simply began to take away part of the transit gas, which led to the most serious break in the history of deliveries of blue fuel to Europe.
Today is a similar situation. Powers of the ruling elite of Ukraine, as well as Russian-Ukrainian gas supply and transit contracts expire in 2019. The transit of natural gas through the Ukrainian gas transmission system is falling now. In January-November 2018 its level decreased by 7.4% compared to the same period last year – to 79.162 billion cubic meters.
Therefore, various options are being discussed today: from a simple reduction in transit volumes to ‘booking’ of capacity of the Ukraine’s gas transportation system for a fixed period instead of concluding long-term supplies of Russian gas. However, full-fledged negotiations on a new agreement have not yet been conducted. After the ruling of the Stockholm Arbitration Court, Gazprom refuses to discuss extension of long-term contracts or conclusion of new ones. Real negotiations on gas relations may begin in the late fall, after a new political elite is finally formed in Ukraine.
Now one thing is clear – the transit of Russian gas through Ukraine after 2019 will continue. Alternative routes like Nord Stream 2 or the TurkStream, as well as all the necessary infrastructure for them, are not yet ready, and Russia’s long-term commitments to European countries have not disappeared. However, the Russian company can go for reduction in the volume of deliveries through Ukraine to 30 billion cubic meters, which will make the use of the Ukrainian gas transmission network completely unprofitable.
The main danger lies in the fact that soon elections and high risk of losing power are pushing the current political elite to ill-considered actions. It is impossible to completely exclude the scenario in which ‘under the laws of wartime’ Kyiv will try to change the functioning mode of the Ukrainian gas transmission companies and repeat the maneuvers of 2008–2009. Along with this, the country’s leadership will try to portray everything as some ‘non-military defense’ against Russian aggression and will appeal to Russia’s responsibility for deepening the crisis. Such an approach will be reasonable: natural gas is a strategic export resource for Moscow, and the Kremlin reacts sharply to any intervention in this area. A response to Ukraine in this case is more likely, which obviously will result in EU sanctions and a round of international condemnation of Moscow.
Moreover, growing gas problem can provoke another rise in anti-Russian sentiments within Ukraine, and these background is most understandable and familiar both for Petro Poroshenko and for his supporters. In addition, growing gas problem and even more so response from Moscow in this part can serve to prolong the martial law for an indefinite period – with the subsequent postponement of elections, etc.
Will Kyiv risk to repeat the crisis of a decade ago?
