Does gas transport between Russia and Europe still bring Ukraine money? – liberation

Question asked by Luc-Michel on April 7, 2022.

They ask us if the Brotherhood gas pipeline, which crosses Ukraine and is one of the four gas pipelines supplying Europe with Russian gas, is still operational despite the Russian-led offensive since February 24. And if, moreover, the activity of this gas pipeline continues to bring income to Ukrainians.

Almost half (45%) of European Union (EU) gas imports come from Russia, with Moscow supplying around 150 billion cubic meters of gas to member states each year. The Brotherhood (“Brotherhood”) gas pipeline, some 4,000 kilometers long, was the first to be commissioned in 1967 to ensure the transport of this gas. Starting from northern Russia, it crosses Ukrainian territory and serves around ten European countries, including Germany, France and Italy (as shown on the map published by Planète Energies, a TotalEnergies group website).

Brotherhood, a vital link in transporting Russian gas to Europe, is still operational. In the weeks following the outbreak of war in Ukraine, the gas pipeline became even more active again. The quantities of hydrocarbons transported in the pipeline between Russia and Ukraine thus amounted to 1,165 gigawatt hours (GWh) on March 31, compared to 642 GWh on February 23 (on the eve of Vladimir Putin’s declaration of war). the European Association of Transmission System Operators.

“Suppliers fill their warehouses as much as possible”

By the end of 2021, however, the volumes ordered by Europeans from Russia had started to decline. A cut whose only justification appears to be financial, he explains CheckNews Thierry Bros, energy expert and teacher at Sciences-Po Paris. The starting point: the decision of the Russian gas company Gazprom not to sell any more gas to the EU during 2021 via so-called “spot” contracts – in which transactions are settled on a daily basis – at the prices set at the time – but only using the long-term contracts , which have been concluded with European energy suppliers (notably the French company Engie). “With these long-term contracts, European companies set the volumes they want to import on a daily basis.”with a minimum volume to be ordered monthly (around 8 billion cubic meters), indicates Thierry Bros. The drop in orders, which began in autumn 2021 and then intensified at the beginning of the year, reaching a historically low level in January, can therefore be explained by the desire of European operators declare not to do so “Ordering too much Russian gas because it was more expensive than the price set on the spot market”and thus in particular the American gas.

“By ordering the minimum amount in the long-term contracts in January, suppliers realized savings, but at the same time exacerbated European energy insecurity”regrets Thierry Bros, who adds: “If Russia had decided on an embargo or imposed sanctions at the beginning of the war, we would have run out of gas.”

The fears aroused by the Moscow offensive were therefore accompanied by a change of course. “75% of Russian gas is replaceable, 25% is notemphasizes the energy expert. Therefore, in order not to run out of petrol in the event of an embargo, suppliers try to replenish their stocks as much as possible. They do in March what they should have done in January: request the maximum amounts provided for in the long-term contracts. Salmost 12 billion cubic meters. Hydrocarbon flows from Russia to Europe thus increased by 39% between January and March. However, Gazprom’s export volume remains below 2021 levels as spot purchases from Russia have since ended.

This booming recovery in imports that do not flow exclusively through the Brotherhood gas pipeline contrasts with the discourse advocated by the European Commission and much of the member states in favor of reducing demand for Russian gas. And even if that political intent were indeed followed by a drastic drop in orders from suppliers, they would have little leeway: long-term contracts (some extending to 2040) oblige them to pay Russia the minimum purchase volume, whether they import it or not. Only an embargo could break what was contractually envisaged. Hence the idea of ​​Thierry Bros “An end-of-year embargo that leaves time to build enough reserves for next winter while investing to produce more”.

Reduction of transported volumes in 2019

In addition to its obligations towards Member States, Russia has an obligation towards Ukraine: the latter owns the section of the gas pipeline located on its territory, while the former has to pay a toll to ensure the passage of its gas. An obligation that is enshrined in an international commercial law treaty and cannot be called into question even by the war, as the agreement runs until 2024.

Thus, every year Ukraine receives $1.28 billion to transport a minimum volume of 40 billion cubic meters of gas. “If the Russians decide to send more gas, they will have to pay an additional amount. If they decide to broadcast less, they still have to pay that 1.28 billion, except in cases of force majeure – in other words, if the pipe burst.”explains Thierry Bros. Due to weak orders from European operators in January and February, they fell below the 40 billion cubic meter mark, the Russians said “Partially paid for transport not performed”.

If this toll guarantees Ukrainians a source of income, it is disproportionate to the money Russia brings in from trading hydrocarbons extracted from its soil. The average European gas bill to Russia is $400 million a day, Thierry Bros “Ukraine receives only 1.28 billion a year, that’s about 3.5 million a day”. Because they don’t pay tolls “only a very small part of the gas revenue”so did the Ukrainians “Even more interest in the import ban on Russian gas”seen as a way for the Kremlin to fund the invasion launched seven weeks ago.

For their part, the Russians now have a greater interest in transporting their fuel through the gas pipelines they own, notably the Nord Stream (Baltic Sea) and the Yamal (which crosses Belarus and Poland), and for which they do not pay any tolls.

When Russia renegotiated its gas transit deal with Ukraine in 2019, it already had in mind favoring alternatives to Brotherhood and therefore called for a reduction in the volumes shipped through Ukraine to Europe. From 65 billion cubic meters in 2020, the minimum volume that Gazprom conducts on Ukrainian soil has increased to 40 billion cubic meters for the years 2021-2024.

Leave a Comment