Why do we find ourselves in the position of the gas hostages of Ukraine?

Only a short time ago many of us wandered what will happen in Ukraine, if Russia decides to shut off gas supplies to Europe through the Ukrainian gas transportation system, as in 2009. Mostly now the Ukrainian crisis is presented to Europeans as an outcome of the aggressive policy of Russia. So for us before now, there were more or less sound reasons for considering this further possible turn in gas disputes as an unfriendly action from Russia.

But recent events have surpassed my intention to consider how Russia shuts off supplies of the Siberian gas to Europe.
Ukraine turned out to be ahead of what I could expect as well as probably many others who with concern and often with a growing disapproval evaluate the situation related to the supply of gas to Europe.
Although to be obvious, a new move in the gas disputes was directed by the Atlantic patrons of Ukraine. However, it is not always… Instead of cutting off gas supplies Russia had reacted for Western sanctions and imposed a ban for imports of Finnish and Lithuanian milk, as well as vast majority of other agricultural products from the EU for one year. And after that instead of Russia now Ukraine is declaring its readiness to cut off gas transit!

Ukraine's parliament has recently adopted a new law with a package of sanctions that includes about 30 measures. Although the law doesn't mention Russia as its target, the Ukrainian Prime Minister Arseniy Yatsenyuk said earlier it would open the way to impose sanctions against Russia. One of them is intended for legalizing a ban on transit of Russian natural gas and other energy resources through Ukraine territory!
It is noteworthy that this law transfers the right to impose sanctions to the Ukraine's National Security and Defense Council as if the Board of Ministers of Ukraine would not to be willing itself to take a full responsibility for consequences of its future application.

Now, Ladies and Gentlemen, please feel yourselves comfortable near your computers and tablets and prepare for the news that you are being threatened with blackmail and that it will be a racketeering activity of the Ukrainian authorities!

Assuming that your attention to the political crisis in Ukraine and a related war of economic sanctions against Russia largely (sorry for my cynical viewpoint) has been associated with your curiosity as of a detached observer. But now everything has changed dramatically because that the present action of the Ukrainian authorities obviously poses a direct threat to our well-being.

So far, our politicians have argued about a potential threat of stopping supplies on Russia's initiative, reasoning in this regard that it proves a vital need to reduce as soon as possible "dependence on Russian gas." Although I already mentioned previously that Russian share in an annual gas imports to EU actually is not higher than Norwegian.

But as a matter of fact it turns out that now there is a necessity urgently to discuss the problem of how to reduce dependence on a transit monopolist that is Ukraine. Because in accordance with contractual obligations Ukraine has to provide transportation through its territory of more than 60% of Russian gas supplied to Europe.

So ultimately Ukraine does not care of losing confidence of international business that, as a common rule, should be the most important attribute of any country.

Moreover, the Ukrainian government recognized the fact that shutting off Russian gas transit to Europe would result in a huge loss of about three billion dollars which Ukraine annually earns on providing gas transmission services.

However, Mr. Yatsenyuk is quoted as saying that by such a way Ukraine is going to bring to an end gas dependency from Russia. At the same time, he noted that Ukraine expects that financial aid will be granted by international financial institutions, including the World Bank.

Here I would like to remind you that the full name of the World Bank - the International Bank for Reconstruction and Development. For most of us it is very questionable whether this respected international organization established in order to promote global development, would compensate the huge losses caused by conflicting actions of the Ukrainian authorities, thereby recognizing and by certain way encouraging this attempt of Ukrainian state racketeering aimed at Europe.

Ukraine is eager for depriving Russia of income on gas exports but at the same time as a result Ukraine will block gas supplies to consumers in Austria and in all the countries of South and South-East Europe. That looks like a double strike, is not it?

At the moment I would rather not to sink further into geography of deliveries, let's consider later on how it reflects primary reasons of gas confrontation.

Meanwhile I would not be surprised if some our politicians will continue to remind us the main characters from the popular sci-fi thriller "Men in Black" who did not take off their black glasses in process of manipulating a public awareness. In our real situation political leaders first of all in Brussels also are able to release an information flow which brightly blows up in front of our faces and in our minds, erasing memory. And then, as if nothing had happened, they could start arguing that we have to blame Russians for everything and for disrupted gas supplies for sure. In politicians' opinion allegedly the Ukrainian threat of shutting down gas transit to Europe only more confirms that this is Russia - an unreliable supplier…

It's time to remind ourselves that ultimately it is no matter at all what kind of glasses "men in black" wear and what kind of "flashlights" are in use for promoting a contradictory information. Anyway, it is impossible to ignore the fact that since 2008 after signing the relevant international agreements, for six years Russia has been implementing an ambitious in terms of international scope and a technologically advanced gas pipeline project South Stream, bypassing the Ukrainian gas transport system in order to secure a number of European countries from newly appeared Ukrainian gas blackmailers.

It would look as if nobody realizes in Ukraine that they are going to block gas to Europe, and what the implications will be for Europe. Even though Mr. Yatsenyuk is quoted as saying "We understand the price should been paid by Ukraine (but it is not only those 3 billion USD - Ed.). But we are willing to pay for their independence".
Here you are, there are reasonable questions then. What about us, Europeans? Are we, European citizens willing to continue further to pay for the independence of Ukraine? And what do we expect to get in return? Answer with grim humor might be that in upcoming winter it would not be possible to get anything instead of gas from half-collapsed and half-plundered Ukraine, even neither gorilka nor salt pork which according to their habits could facilitate our stay in unheated homes. And before the winter comes, field rations of NATO soldiers sent together with humanitarian aid to Ukraine will be on the wane.

Not long ago in June in Brussels, the Ukrainian heads and leadership of 28 European countries signed the Association Agreement between Ukraine and the European Union. Under the Agreement, Ukraine should move along the path of deepening political, economic and trade relations with the EU Member States as well as develop cooperation in the fields of justice and security. Two months ago, many of us still were sure that Ukraine really want to be a partner of the EU. However, now our expectations have vanished.
Whether is it possible to consider partnership in case, when, instead of efforts for promoting cooperation Ukraine deliberately jeopardizes an energy security of its strategic partner?

There is another strange assumption that by imposing anti-Russian sanctions Ukraine is trying to support the policy of prohibitions against Russia carried out by the EU and Western allies. But it seems that taking part in this political game on the EU side, Ukraine scores a goal against their own — not the opposing — team, in other words plays against our Western European team. Meanwhile, it is not unlikely that Ukrainian politicians allegedly act in favor of our Western European team, but, in fact, they perform what suggested from behind the Atlantic, as it happened more than once.
Moreover, shutdown of transit pipelines obviously would create not less favorable impacts than new problems. So, for instance, it is hardly possible for Europe to get penalties for the gas contracts infringement from Russia in case of violating gas supply, since such disruptions must be classified as results of force majeure.
At the same time such a threatening precedent would raise the conclusion that there is a vital need in seeking gas detours around both technically and also politically unreliable Ukraine. In this context, it is even more convincing what Russia is making now a significant positive input into the problem of diversification of gas supplies by increasing up to a full capacity of the Nord Stream gas pipeline and by constructing a new South Stream gas pipeline.
Besides another consequence of switching gas supplies from Russia to Europe at new directions a commercial value of the Ukrainian GTS estimated by Ukrainians to 25-35 billion USD, will fall by half.
Therefore, open questions with a multi-billion-Euro cost for all taxpayers. How will Ukraine and EU together with the Atlantic allies raise such large financial resources? What countries, what international financial institutions, and of the topmost importance - at whose expense are they going to reimburse a collapse of the Ukrainian GTS and everything else?
In summary, it remains to say that despite all the political turmoil, Ukraine obviously has to solve gas disputes with Russia on a mutually acceptable basis not using GTS as a monopoly tool for suppressing consumers of transit services both in the West and in the East.

Ukraine will face huge challenges painstakingly seeking reasonable ways of modernizing its gas transport system. It will take years and for all that time ultimately European consumers should mostly rely on gas supplies from existing proven suppliers, including Russia too and Russian pipelines - so-called Streams from the north and from the south bypassing Ukraine with its long-running political, economic and technical problems.

And then, in some years, when at last a stable recovery and expected growth of the European economy will require new gas resources, we all look forward to the long-term results of implementation of the European Commission strategy for expanding the sources of energy supply.

Why Ukraine attempts to put us into a corner as gas hostages?

Why is a basic redundancy rule ignored in some managerial and technical systems although it should be of vital importance?

Car drivers all over the world continue a discussion regarding a necessity of keeping a spare wheel in a car. There are many drivers among us who suppose that, if they have a compressor, a tire repair glue as well as a mobile connection and smooth road up to the nearest service station then it is possible to drive without a spare wheel.

However, there are many opponents in this discussion who were unlucky being in pitch without above mentioned technical aid opportunities. As to long-haul trucking professional drivers they don't debate the topic at all - it is out of question for them that there should be a certain number of spare tires en route. Often we are able to see on highways how they are carrying them over.

Therefore, it is common requirement of providing for redundancy solutions to enhance security in different modes of transportation as well as in technical systems of all sorts. The safety of flights of aircrafts is ensured by means of even triple redundant systems well known in engineering as Triple Modular Redundancy (TMR). A main feature of TMR is that if one component fails then its mistake always has to be blocked by two others. In such a triply redundant system, all three components must fail before it entirely fails to function.
It is not difficult to imagine that in fact a redundancy is a basic universal rule of ensuring security widely used in engineering and technology, which has always existed in nature and continue spreading within different spheres of human life.

Now let’s take a look at the context of redundancy rule on the problem of increasing security of energy supplies to the EU, which the European Commission is currently paying a particular attention. European Energy Security Strategy presented by the European Commission in May, points out that "For the winter ahead, the Commission will work together with Member States, regulators, Transmission Systems Operators and operators to improve the Union's immediate preparedness in respect of possible disruptions (supplies)”.
We can see that the European Commission proposed decisions on this important issue taking into account a redundancy rule in general. The Strategy determines in particular that "investments in back-up infrastructure are now obligatory".

As for natural gas the Strategy gives a great deal of attention to diversification of infrastructure - 27 projects in gas were identified as critical for EU's energy security in the short and medium terms. Their implementation ultimately is expected to enhance diversification of supply possibilities. It obviously complies with a basic redundancy rule since that envisages a usage of several gas pipelines acting as back-up transport capacities relative to each other.

However, it raises significant worries and doubts that dozens of the projects listed in the Strategy are very far yet from commencement of operation. While implementation of some part of the projects has only commenced the other part is on even more earlier stage of pre-feasibility, permitting and financing issues yet. It means that the Strategy implementation might contribute to increasing diversification of gas supplies but it could happen only after 2017.

Moreover, there is only one new pipeline within the list presented in the Strategy - Trans-Anatolian Natural Gas Pipe bringing about 10 bcm of Caspian gas to the EU via Turkey and opening the Southern Gas Corridor that is to be put into operation in 2019 at the earliest.

Meanwhile the question is what energy are we going to obtain until then? In addition, what is the state of play in diversification of gas transport infrastructure and fulfilment of redundancy rule now, "for the winter ahead"?
Nevertheless, you could choose your answer yourself from this range: bad, very bad or worse than ever.
We have to return to the problem related to the Russia–Ukraine gas disputes. In 2013 supplies from Russia in the volume of 136, 2 bcm amounted to about one third of EU natural gas imports. 86 bcm of those gas supplies or more than 60% is pumped by transit through pipelines across Ukrainian territory prior to arriving in the EU, especially to the countries of South and South-East Europe.

It is common knowledge that Ukraine has gone into deep political crisis that has a disastrous influence on economic situation within the country. Kiev is in arrears for gas supplied already from Russia more than $ 5 billion and refuses to pay the debt. For this reason on June 16 Russian company Gazprom switched to advance payment from Ukraine's Naftogaz on deliveries of natural gas in accordance with the contract and completely cut  gas to Ukraine. Since then only gas for Europe has been transmitted via Ukraine in volume of 185 mln cm per a day. The talks on the gas dispute probably will be resumed only August 29.
I already wrote a month ago about technical condition of the Ukrainian gas transport system (GTS). Despite current condition of gas pipes and other equipment has deteriorated beyond the limits caused also by lack of proper repairs since Soviet times the Ukrainian parliament now is trying to pass a bill allowing EU and US companies to lease up to 49 percent of GTS, which is totally owned by Naftogaz Ukraine. In the beginning of June the Ukrainian parliament passed the first reading of this bill but further the process come to standstill because a number of Ukrainian MPs demanded to include additional clause regarding approval of structure of shareholders at the company - GTS operator that means a battle for controlling over the Ukrainian GTS is still continuing.

Whether Western companies really would like to take on lease such high risk assets taking into account its technical condition and chaos in Ukrainian economy it is really a doubtful question.
However, in an extended run it does not matter for us what will happen with a new Ukrainian law because all risks of applying the GTS for gas transit from Russia to our countries would still exist since it is impossible shortly to improve dramatically its technical condition. Besides the lack of operating reserves of gas, necessary for the upcoming winter will drag Ukraine to illegally siphoning off gas supplies intended for Europe how it happened in 2009. There are also risks posed by politicians who are interested in enlarging the conflict between Ukraine and Russia and who are willing to use the problem with the Ukrainian GTS and the gas disputes for escalating tension in the region.

However, what will happen if because of these risks Russia shuts off gas valves for supplies to Europe via the Ukrainian GTS?

In accordance with the Strategy, the European Commission is launching energy security stress tests in light of partial or complete disruption of gas supplies via Ukraine in the upcoming winter. This is correct action but obviously, it is not enough!
By analogy to a wheel story above referring to the case of the Ukrainian GTS one would be sure that even a less experienced driver would unlikely take a risk of performing stress tests in order to find out what will happen with his car if an old, many-times-patched tire fails on the road...
According to the redundancy rule, we must use reliable tires ensuring road safety and so the same for security of gas supplies there is a necessity in developing the transport infrastructure including extension of modern fail-safe gas transmission routes.

You could be aware yourself and by reading my previous posts that the international project of South Stream gas pipeline now is one of few realistic opportunities of strengthening security of gas supplies. Siberian gas having been already familiar to a half of Europeans for many years should come via the South Stream to Europe in autumn next year bypassing politically, economically and technically unstable Ukraine.
But actually now there is an intention of getting European companies and indirectly all of us into a mess named the Ukrainian GTS since it is proposed to use it further as an old, rusted wheel instead of replacing it by a new one - by a new gas pipeline, by a new route and by many other "news". They are arguing that substitution for a new modern pipeline will cause an increase in dependency on a certain supplier of gas up to a critical level. Nevertheless, it does admit of doubt why it might happen only because of shifting from one gas transmission route to another.

In fact, we are speaking about the change of transport routes of existing volumes of gas supplies. Originally, under the contracts with Russian Gazprom the Ukrainian GTS was obliged to pump 120 bcm of natural gas. After putting the Nord Stream pipeline into operation and shifting the gas supplies route to Germany via Baltic Sea the transit via Ukraine decreased down to 86 bcm last year. Moreover, it will shrink again by 60 bcm because of the South Stream.

Reportedly, it causes a drastic reduction of the commercial value of the Ukrainian GTS.

Why should we worry? European gas consumers should not care about the commercial value of the Ukrainian GTS, should they?

Ultimately, it doubles troubles for Ukrainian authorities and their foreign principals. Nevertheless, neither in Brussels no in Ukraine they would like to see deeply an economic impact of scenario if Russia really would be pushed for the decision of turning off the gas valves on transit supplies to Europe via Ukraine, as it took place in 2009. However, it would be another story.

Why “those who don't know history are doomed to repeat it”?

These widely known words belong to Edmund Burke, British political theorist and philosopher of 18th century. Some people keep him in memory especially in the USA as MP of the British Parliament arguing in favor of American colonists against attempts of the government of King George III to strengthen the royal power.

As before there are many cases in a modern world proving the truth of Edmund Burke's words. And it seems to me we can see one of particularly extraordinary case when we consider development of relations between Europe and Russia in the gas field that began as far back as the Soviet Union times.
Scanning the past we have to realize that for more than 40 years ultimately overpassing all political contradictions and collisions of interests energy always remained the theme number one within relations between Europe and Moscow. In fact, it all commenced in the 1960s when despite a prolonged state of cold war the representatives of energy sector from West Germany and the USSR started negotiating the very first gas contract.

At those times they shaped a concept of signing a long-term agreement between West Germany and the Soviet Union envisaging supplies of super-diameter steel pipes and other equipment for construction of pipeline that overall had to be paid back by natural gas transported from Western Siberia to Europe. In this regard that long term agreement remained in history under the name of "gas for pipe". In 1960 under that long-term agreement Soviet trade organizations placed orders for super-diameter pipes at German manufacturers. However in April 1963 Bundeskanzler of West Germany Konrad Adenauer put under a ban implementation of the agreement arguing that it's fulfillment "threatens security of Germany".
The government of Western Germany followed recommendations of the Coordinating Committee for Multilateral Export Controls (CoCom) and referred to "interests of allies security". This decision resulted in abnormal losses - in consequence of breaking the contract for shipments of steel pipes company Mannesmann lost from 80 to 100 mln Deutsche Marks. Krupp company suffered the same significant losses.
It was known widely about a distinct role of the US politicians who demanded that their NATO allies should wind up cooperation in the gas field. It was argued among other reasons rather seriously that in case of war actions the pipelines from the USSR might be applied for providing Soviet tanks with fuel.
Refueling tanks directly out of a long distance pipeline?! You hardly can imagine something like that even for a science fiction film, can’t you?

Much later in 1969 when for the first time Bundeskanzler Willy Brandt headed the German government the eastern policy of West Germany changed significantly. Next year already after 10-month negotiations three agreements were signed according to which USSR was obliged to deliver annually 3 bcm of natural gas. The German party represented by company Mannesmann undertook obligations of paying for received fuel by means of shipments of 1,2 mln ton steel pipes necessary for construction of gas pipeline to the West. By the way this volume of pipes correspond to 1,5 thousand kilometers of pipeline but in the whole the construction needed 4,5 thousand kilometers. In return company Ruhrgas from Essen purchased Soviet gas.
As a result of that barter agreement "gas for pipes" called then as the East-West "deal of the century" because of its scales a commercial scheme "transport infrastructure and finance in exchange for gas" was fulfilled for mutual benefit. In total the construction of three pipelines was implemented including Orenburg - Western border, Urengoy - Pomary - Uzhgorod and Yamburg - Western border. All of them are in operation up to now continuing supplies of Siberian gas to Europe.

However, as you aware it was far from the end of the history of political pressure on relations in the field of gas between Europe and the Soviet Union. Yet another severe impact happened in 1980s when the US pressure on West Germany constituted in order to prevent further development of relations in the field of gas. As it was pointed out the Soviet Union needed financial resources for military purposes and especially for expanding an invasion into Afghanistan.

Regardless of the consequences reasonable economic interests and common sense of our European politicians prevailed over these arguments and in 1981 company Ruhrgas and Soviet organization Souzgasexport made a new contract that envisaged shipments to West Germany 8 bcm gas annually from 1984 till 2008. Nevertheless under the US pressure a ceiling of 16% was imposed in respect of the share of Soviet gas within annual consumption in West Germany.

Further relations with Russia in the field of gas went on expanding both in West Germany and in other European countries. Now share of gas from Russia within a total annual volume of the EU consumption accounts for about 30%. Diversification of routes of gas supplies to Europe has developed too. In November 2011 direct shipments of gas to West Germany from Russia via Nord Stream pipeline were started bypassing transit countries what as many of us realize should increase security of supplies. And in the beginning of 2014 German company Europipe had got a contract with regard to supply 330 thousand ton of steel pipes for offshore section of South Stream pipeline costing about 500 mln Euro.

Meanwhile do not forget what we are speaking about - ultimately the times of political spin in gas relations have not remained yet behind in the past. It's not possible for me and obviously for you as well to imagine that nowadays politicians may seem to see "Russian tanks... on pipe". However, as before energy relations are conditional upon different political circumstances. Is there a rational point for us in that a timeworn tendency is prevailing to use energy relations tried-and-true in the past for building political leverage.

Why aren't we able to see new attempts of ignoring economic feasibility obviously existing at different levels - from a macro level of dozens of European states further to levels of dozens thousand of enterprises and many hundred thousand our households? For somebody probably it sounds like why aren't we able to see the back side of the moon!?

Meine Damen und Herren, having read the story would you please switch on the light around, on this occasion don't save energy as usual and try spotlighting your answer on as always challenging question:

Why that we don't learn from the lessons of history as a matter of fact often is the most important of all the lessons that history has to teach us?
..

Why the Ukrainian court has changed its orientation?

Do you think that an orientation change concerns human beings only, their rights and freedoms that should be protected by court as one of the basics of our highly democratic society? As to our secular traditions you are absolutely right.

Meanwhile it appears that there is a country quite near where not human beings but judicial authority reverses orientation of court judgments towards opposite ones when a legal decision "guilty" is replaced to the same extent decisive court sentence "unguilty". By the way there are less than three and a half years between these court decisions.

Now you unlikely would be surprised at me if I am saying that this story is about modern Ukraine where in October 2011 Kiev’s Pechora district court accused ex-Prime Minister Yulia Tymoshenko of exceeding her authority when signing gas supply contracts with Russia in January 2009. The court decision was as much as ruthless. As the prosecutors demanded Yulia Tymoshenko was sentenced for 7 years of imprisonment and a fine of about USD 200 million. According to the court it was an amount equals to a financial loss that Ukraine had sustained through an unprofitable gas contract. So this court decision was aimed at undermining her political prestige as the leader of Ukrainian opposition and at raising doubts about a legitimacy of gas contracts signed with Russia in 2009
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In recent years several European countries and NGOs for protection of human rights have publicly evaluated this court decision as an example of selective justice and an act of politically motivated prosecution. Advocacy of Mrs. Tymoshenko stepped up to a high international level when the EU postponed further development of the association agreement and the agreement on the creation of a deep and comprehensive free trade area. Then European leaders presumed that these agreements would not be ratified unless Ukraine would not correct this stark deterioration of democracy and the rule of law.
Now it should be noted that on 14th April this year there was an end of that prosecutory story when the Supreme Court of Ukraine closed so called "gas deal" for absence of a crime in the considered activity. And some days ago the Supreme Court of Ukraine brought a full text of verdict of not guilty for ex-Prime Minister of Ukraine, the leader of the All-Ukrainian Union "Fatherland" political party Mrs. Tymoshenko.
But what about the "gas deal" itself? Probably nobody would be surprised at such a "reverse move" of the Ukrainian court and drastic changes of its orientation that obviously revealed the situation within internal political processes of Ukraine.

Insofar as the "gas deal" is concerned neither me nor anybody else has to be doubt that the decision of the Supreme Court of Ukraine practically recognizes indisputability of the gas contract between Russia and Ukraine, is not it?

However, in fact, in despite of putting on the shelf the "gas deal" prior to that accusing Mrs. Tymoshenko, in the same way as before Ukraine is trying to challenge the validity of the gas contract of 2009 by which the debt of Ukraine for gas supplies only in November and December last year amounts to USD 1,45 bln. Even our highly respected politicians from Brussels actively taking part in the three-sided talks with the EU, Ukraine and Russia up to now could not influence over payments under the gas contract.

Why is it possible in the country, which is eager to join the EU, and willing to reach our standards including legal system as well? Why is it admissible to change court decisions on political grounds at the same time avoiding a fair fulfilment of the undertaken commercial obligations?
And yet whether will it be the only precedent if Ukraine integrates into the EU? If no than why?
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Shale revolution. Why USA practice does not suite Europe?

There is a rising spout of debate regarding shale gas in Europe. Is shale revolution possible in Europe?

Technology and ecology 
Directional drilling and hydraulic fracturing are used in shale gas industry. Please check this video for the technology description.

Shale gas is quite expensive. The cost of shale gas production is several times greater than the cost of production of conventional gas.

Devon Energy in the U.S. initiated industrial production of shale gas in the early 2000s. Due to significant increase of shale gas projects U.S. have become the world leader in natural gas production. After more than 10 years of active wells fracturing there are disastrous consequences for the environment and groundwater. People that live near the fields are particularly skeptical about shale gas. Residents tell their true stories in these documentaries:

  

Fracking Hell: The Untold Story

Gasland

In America there are rising concerns regarding shale gas industry. Scientists from Cornell University concluded that at least 20% of the earthquakes in recent years in Oklahoma, are related to shale gas wells and use of hydraulic fracturing at the wells. According to researchers, the activity at these sites may cause tremors in a radius of 35 kilometers.

Shale gas in Europe 

There are significant shale gas reserves in Europe. France, Germany, Switzerland, Czech Republic, Romania, Bulgaria and many other countries imposed a moratorium on shale gas projects. But in Poland and Ukraine U.S. companies actively promote shale projects.

In late 2011, ExxonMobil drilled in Poland two test wells, but in 2012 turned the project, stating its unprofitability. Shell and Chevron in 2012 won the contract to develop wells in several regions of Ukraine. Recently, the son of U.S. Vice President Joe Biden Hunter Biden joined the Ukrainian oil and gas company Burisma. One gets the impression that the Americans plan to sell to Europe Ukrainian shale gas. However, why should people and environment suffer? Why Ukrainian authorities do not protect Ukrainian communities? 

In Europe, there are rising concerns about shale gas. European Energy Commissioner Guenther Oettinger said in interview to B.Z. Am Sonntag this Sunday that shale gas would provide only 10% of Europe gas demand. 

We can say that the dream of a shale revolution like the one in the U.S. will not come true in Europe. Some countries prohibit shale gas production because of huge negative environmental impact. Some others cannot find profitable shale projects because of high cost of production. Only in Ukraine shale projects are developed. Environmental issues and community health are disregarded by geopolitical strategies and transnational companies’ profits. This is weird. After all, we consider Ukraine as a part of Europe. However, we see evidences that speak of Ukraine as a colonial country. 

Why is it happening?

Why might a monopoly status be interpreted differently?

Why might a monopoly status be interpreted differently?

A monopoly means a single supplier in a market and it is no good at all. A monopoly is that stops development. A monopoly is that...

However, properly speaking what is it a monopoly in terms of law and market? As you understand, I am going to talk about an energy market and to be exact it is about the European gas market.
In recent time, all of us have heard a lot about a monopoly of Russian gas at the European market. I myself as all of us perceive this statement such as an axiom. However, the events with South Stream pipeline project have made me more deeply consider that definition. Here are a number of questions such as: what kind of monopoly? Whose monopoly?  On the other hand, monopoly for what? According to Eurogas statistics in 2013 Europe consumed 462 bcm of natural gas where supplies from Russia accounted for 161 bcm. Deducting the volume of gas imported by Turkey, it amounted to about 29% in overall volume of EU gas supplies. Whether it is possible to consider 29% market share as monopolistic one? I am not sure ... But if yes then how we should define Norwegian Companies having 29% market share as well.

So is it a monopoly or not? In recent time we, Europeans are listening to the US in all ways (especially in energy sector). And how is it determined by the US legislation? In the US a company is deemed a monopoly if its share of the market accounts for 50% or more percent. Therefore, we are drawing a conclusion from that - neither Russian nor Norwegian companies do not enjoy a monopoly position at the European gas market.

Let's see what is going on with a transit of gas coming to Europe? As to Norwegian gas everything's alright. The gas supplies are carried out via several countries.
But what about the transit of gas from Siberia? Here you are - my questions are appearing, obvious questions. In 2013 Russia delivered for exports in total 161 bcm of gas including 85 bcm of gas transmitted via Ukraine that amounts to 53%. In other words according to the US legislation mentioned above, it is an example of monopolies in their pure form! Where is logic then?

From one hand, Russia with 29% of gas supplies to Europe is blamed in monopoly position. And, from the other hand, despite of an unreliable, outdated and in fact unmanageable Ukrainian GTS we grant the right to Ukraine to be a monopolistic transit country. At the same time, there is not any security assurance and clear evidences of that we will not be freezing next winter.

Why is an attitude to monopoly diametrically opposed?

Why do I take a pen, sorry, a keyboard, once again?

Last time I wrote that there are no routes distinctly specified for exports in the Ukrainian GTS because this gas transmission system was developed in such a way that the task of gas supplies to Europe conflicting with the task of providing internal gas consumers. However, recent events have revealed that this conflict situation is not the only problem for European countries consuming Russian gas transmitted via Ukraine.

On 17 June 2014, there was an explosion at the part of the gas pipeline in Poltava region (Ukraine) providing gas supplies to Europe. Different explanations of this accident were made public from a terrorist attack aimed at discrediting of Ukraine as a reliable transit operator up to an ordinary technical breakdown.
Meanwhile there is a question whether that breakdown is an ordinary one? Official name of this gas pipeline "Urengoy-Pomary-Uzhgorod". Now reviewing a background information of that pipeline we can see that the pipeline was built in 1982 -1984 or 30 years ago. Referring to the same background information, at those times the Khartsyzsk plant produced for the pipeline "Urengoy-Pomary-Uzhgorod" double polyethylene coating pipes. A normal operating life of these pipes are 12 years. However, I would like to refer to the Ukrainian information agency says: "Governor of Poltava region Victor Bugaychuk announced that the gas pipeline been in a critical condition. There are 11 repair patches in that part (of the pipeline - my comment). Naftogaz refused to provide financing for repair works”.

And now your attention is necessary: strategic pipeline to Europe built 30 years ago with exceeded time limit coating has never been under repairs!!! The question is how many such unsafe pipelines in Ukraine are in use for supplies of gas to Europe.

As you understand, I am asking rhetorically while the answer to that question does not grant any optimism.
Somebody will oppose that there were no termination of gas supplies to Europe yet. Yes, that is correct, but it takes place during summer because of seasonal underutilization of other pipelines' capacity. Moreover, do you imagine what will happen in winter season?

However, it looks as if Mr. Yatsenyuk has found an opportunity of obtaining finance for repairs and upgrading of gas transmission system. It is assumed to create a company - transmission system operator where 49% would belong to Americans (remember the younger son of US Vice President Joseph Biden...) as well as European investors and Ukraine will possess the rest of 51%.

It is an interesting proposal. In fact, are American and European investors ready to put their money into the Ukrainian GTS? According to different estimates the total amount is in range from 2,5 to 17 billion USD which could burden the European gas consumers. Meanwhile the upper figure is already comparable with the costs of the luckless South Stream project which is under construction based on modern technologies and pipes produced in Europe and is free of transit risks. I fully agree with the President of Austria who supported South Stream project implementation and made possible for Austria to feel securely in energy matters.

I do hope that you understand why?.