Kyivpost today recommends in its editorial:
Investing in Ukraine's gas pipeline is the best and cheapest option for Europe to secure Russian gas supplies
The January natural gas war between Ukraine and Russia was a badly needed wake-up call for European Union bureaucrats who have dragged their feet on energy diversification and who have long been wimpy with Russia.
The cutoff of natural gas supplies revealed how deeply dependent both Ukraine and Europe have become on a nation whose leaders are keen to use energy as a geopolitical tool of influence and blackmail. One of Russia's aims was to smear Ukraine, undermining its reputation in Europe as a functioning democracy and as a reliable transit route for Russian gas to Europe.
The Russians also hoped to build support for costly alternative pipeline projects bypassing Ukraine. But that's a tough sell.
Kremlin leaders are finding it hard to finance the $20 billion Nord Stream project across the Baltic Sea, and for good reason. It's a very expensive way to pump 30-55 billion cubic meters of gas.
Another Kremlin favorite is the $20 billion South Stream, which would go through the Black Sea into Bulgaria, also an expensive way to move 30 billion cubic meters of gas.
A third option to bypass Ukraine, touted mainly in the West, is the $13 billion Nabucco gas pipeline. But that's a stiff price tag to move 30 billion cubic meters.
But the better and cheaper option would be to invest up to $3 billion or so in strengthening Ukraine's pipeline system, which already pumps a whopping 120 billion cubic meters of gas each year. The nation's network could pump more, and do so more efficiently, with needed upgrades.
While Russian bad behavior has shown that Europe and everyone else should explore other energy options, Europeans should also back a consortium that would invest into Ukraine's state-owned pipeline. Ukrainian leaders should embrace this option as well. It would bolter the nation's free-market credentials and its economic importance. Europeans would then be deeply involved in the gas issue all the way to the Russian border. Ukraine's gas pipeline might also be a key to opening the door to future membership in the European Union.
In the next five to seven years, Ukraine's vast pipelines will remain dominant, yet vulnerable. Still, the existing network remains the best and cheapest way to pump Russian gas to Europe.
I can't vouch for the numbers, but the argument seems clear. Though it's only a newspaper that is talking, not the government.
But on what terms will this be offered? Will the EU (or the corporation it says it will set up for pipelines) enter into a bidding war with Gazprom for use (and modernisation) of the Ukrainian network, or will it be outright privatisation? If so, given the current legislation in Ukraine preventing the gas transmission system's privatisation or use through concessions (or other ways) we can predict some tough battles ahead, on the usual lines in the government.
And a bidding war under the current financial crisis will be interesting. Does anyone have any money to bid? And can Russia afford to lose?
Still Ukraine stands to gain if it can get the network modernised free and still retain ownership. We live in interesting times.
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