Russia-Ukraine 2009 Gas Crisis

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Russia-Ukraine 2009 Gas Crisis Oleksandr Sushko, Iulian Chifu, Oazu Nantoi RUSSIA-UKRAINE 2009 GAS CRISIS: Comparative view from Kyiv, Bucharest and Chisinau Institute for Euro-Atlantic Cooperation Kyiv-2010 Supported by: Opinions expressed in written or electronic publication are those of authors and do not necessary represent those of Black Sea Trust, German Marshall Fund or partners. ББК ISBN Oleksandr Sushko (Ukraine), chapter 4 Iulian Chifu (Romania), chapter 1 and 2 Oazu Nantoi (Republic of Moldova), chapter 3 Translation: Oksana Shulyar Institute for Euro-Atlantic Cooperation , Kyiv The publication aims to provide for comparative analysis of 2009 Russia-Ukraine gas crisis’ impact on decision-making processes in the three neighboring countries: Ukraine, Romania and the Republic of Moldova. The research is based on cognitive institutional- ized approach developed by the Crisis Management Europe Program under the guidance of the Center for Crisis Management Research and Training (CRISMART) at the Swedish National Defense College. CONTENT Foreword ........................................................................................................................4 General Context .............................................................................................................6 1. Theoretical Background: CRISMART and the Crisis Management Europe Research Program ........................................................................................7 2. Gas crisis: a view from Bucharset ............................................................................13 3. Gas crisis: a view from Chisinau ..............................................................................39 4. Gas crisis: a view from Kyiv ....................................................................................55 Annexes .........................................................................................................................74 Bibliography ..................................................................................................................79 3 RUSSIA-UKRAINE 2009 GAS CRISIS: Comparative view from Kyiv, Bucharest and Chisinau FOREWORD Dramatic events, known as Ukraine-Russia «gas crisis» in 2009 caused significant conse- quences that go far beyond the bilateral relations of the crisis major players. Taking into consideration the essential increase of international attention to the problems of energy security, there was a chance to eliminate from the practice of international gas relations the most predisposing crisis elements which are non-transparency and inflexibil- ity of the gas market, its dependence on monopoly suppliers and intense political nature of gas relations. Prospects for the situation development remain unclear. Change of leadership of Ukraine after 2010 Presidential election will certainly lead to a new attempt of re-thinking of «gas crisis» lessons and relations format between producers, transit countries and gas suppliers. Unfortunately, the first signals of the new government show that deep gas sector reform in accordance with a clear program of reforms is not among its top priorities. So far we have not heard how the transparency of the gas market will be ensured. In- stead, there was repeatedly suggested to come back to the ideas being rejected by the past years experience, such as “Gas Transport Consortiums”, which does not include compulsory reforms, whereas, can threaten with a loss of control over the national Gas Transport System (GTS). Whereas Ukraine finally managed to jump down from the needle of «cheap prices» for gas and thereby eliminate the possibility of blackmail by reviewing prices there have been heard again the calls for return to the practice of extra-market and preferential pricing based on political conditions and shadow business interests. Our neighbors from the Republic of Moldova have already accumulated a negative ex- perience: Moldova pays for gas as any other country in the region, and meanwhile its GTS is definitely lost (Gazprom owns 50% +1 share). Moldova’s lessons have to be carefully studied by all Ukrainian decision makers. The main lesson learned — gas price cuts are temporary, but the ownership of strategic pipelines is lost forever. Whereas Romanian experience is more productive: country had no claims for price cuts or other preferential conditions from Russia. Instead, it was able to reduce gas consumption and minimize import needs, ensuring the most of its gas needs with domestic gas output. A comparative view of three countries — Ukraine, the Republic of Moldova and Roma- nia — where each country in its own way was involved in the course and consequences of «gas crisis» provides us an opportunity to match the degree of vulnerability of countries that are in different weight categories, international regimes and organizations; they have a varying degree of economy reforming and different quality of the state institutional ca- pacity and national unity. At the same time these countries belong to the only region, they experience similar transformation problems that make it possible and efficient to compare their practices. 4 RUSSIA-UKRAINE 2009 GAS CRISIS: Comparative view from Kyiv, Bucharest and Chisinau Given research was prepared by authors of the three countries. Each of the three parts is an independent research and reflects the evaluation of authors from different states. Where- as joint methodology allows to compare the situation in three countries with common char- acteristics. Oleksandr Sushko Research Director Institute for Euro-Atlantic Cooperation 5 RUSSIA-UKRAINE 2009 GAS CRISIS: Comparative view from Kyiv, Bucharest and Chisinau GENERAL CONTEXT On 2 January 2009, the gas deliveries from the Russian Federation to Romania via Ukraine and the Republic of Moldova went down. The ostensible reason was another dis- pute between Russia and Ukraine over the failure to renew existing contracts and to repay outstanding Ukrainian debts to the Russian gas company Gazprom. Ukrainian imports of gas from Central Asia via Russia were stopped on 1 January. Gas supplies from Russia via Ukraine to 18 other European countries stopped on 6 January. In Bulgaria and other Balkan countries that were heavily dependent on imported Russian gas, many residents were left without heating in the midst of a harsh winter. A a humanitarian crisis resulted. The Russian and Ukrainian governments signed an agreement on 19 January providing for the resumption of supplies to Ukraine and other customers downstream. Still, the two sides did not make public some details of their agreement, while other parts re- mained to be settled at a later date. On 21 January, the gas deliveries were fully restored. The crisis happened a few days after a new Government was installed in Romania follow- ing the general elections that were held on 30 November 2008. The ministers were sworn in on 23 December and a week later they were caught in the middle of a gas crisis. The implications were huge since the gas shortages came on top of the economic and financial crisis that was already playing havoc with the world economy and began to show its effects in Romania in the last 3 months of 2008. In Ukraine gas crisis emerged immediately after the end of strong parliamentary-govern- mental crisis: the threat of the new early elections was just removed, ruling coalition not just revived but even widened. However, it did not helped to overcome the conflict between the president and Cabinet of Ministers’ leadership. 6 RUSSIA-UKRAINE 2009 GAS CRISIS: Comparative view from Kyiv, Bucharest and Chisinau 1. THEORETICAL BACKGROUND: CRISMART AND THE CRISIS MANAGEMENT EUROPE RESEARCH PROGRAM1 The NATO open doors policy and the EU enlargement highlighted the fact that effective civilian crisis management and civil protection had become important items on the public policy agendas of individual nations as well as international organizations. Civilian crises can all too easily escalate into political crises or lead to the outbreak of violent domestic or international conflicts. The Crisis Management (CM) Europe program is a research project aiming to produce scientific knowledge that can be used to train practitioners to cope more effectively with national, regional and transnational crises. The CM Europe Program was initiated in 1997 with a focus on the Baltic Sea area under the guidance of the Center for Crisis Management Research and Training (CRISMART) at the Swedish National Defense College. It currently involves more than one hundred scholars from different parts of Europe and North America. The program systematically documents and analyzes specific cases of national and regional crises. It relies upon a con- textually grounded process tracing method for case reconstruction and dissection derived from relevant literature in political science, psychology, and organizational sociology. The Romanian research team joined that international effort in 2002. This book represents the tenth published CM Europe volume focusing on national crisis management2. These case studies reflect an attempt to apply a scientifically informed, systematic, and user-friendly methodology in a uniform fashion to a set of cases focused on various policy sectors and countries. In this volume, we seek to compare the challenging events docu- mented in the so-called “gas crisis” in order to examine the ways in which the governments and the societies in Ukraine, the Republic of Moldova, and Romania perceived that crisis and coped with it. The general purpose
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