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“Price increase is inevitable”: why did Ukraine need a virtual gas reverse from Slovakia


Ukraine and Slovakia signed an agreement to launch a virtual reverse of Russian gas on March 1, 2020. According to the terms of the agreement, Kiev will be able to take a certain part of the blue fuel supplied by Bratislava through the Ukrainian gas transportation system, registering it as purchasing gas from Slovakia. At the same time, thanks to the construction of special interconnectors, the acquired gas in practice will not be pumped in the opposite direction, which is why such a mechanism is called a virtual reverse. According to experts, the use of such schemes leads to higher gas prices for Ukrainian consumers. At the same time, analysts believe that Kiev will continue to use the reverse anyway, since it needs to demonstrate to the voter independence from Moscow in energy matters.

Ukraine agreed with Slovakia on the launch, on March 1, 2020, of a virtual reverse of Russian gas going to Europe through Ukrainian territory. The corresponding agreement was signed between the Ukrainian GTS Operator and the Slovak company Eustream as

“In addition to the throughput capacities of the GIS (Gas Measuring Station, - RT ) Budinets, through which gas has been supplied to the Ukrainian market since 2014, on the basis of the signed agreement on interaction with respect to the GIS Velke Kapushany-Uzhgorod Eustream and the GTS Operator of Ukraine launch virtual market reverse gas supplies (the so-called backhaul) through the GIS Velke Kapusany-Uzhgorod, thereby expanding the Slovak gas supply channel to Ukraine, ”says the website Eustream as

A similar message was published on the website of the Ukrainian enterprise.

It is noted that deliveries will be carried out in the amount of 10 million cubic meters. m per day. At the same time, the company emphasized that the stability of the reverse will depend on the presence of gas transit through the territory of Ukraine.

“GTS (gas transmission system, - RT ) operators remind that reverse power depends on the presence of a direct flow, and therefore, are interrupted and can be stopped if there is no flow in the direction from Ukraine to Slovakia. GTS operators can agree to increase the level of virtual reverse capacities in case of stable interest in the markets, ”added Eustream as

The signing of the contract was commented on Facebook by Sergey Makogon, Director General of Ukraine’s GTS Operator. According to him, this blue fuel supply scheme will reduce Ukraine’s dependence on Russian Gazprom.

“We have been going to this event for almost five years. Due to Gazprom’s position, which tried to limit our ability to import gas from the EU, in 2014 we couldn’t import gas to Ukraine using a virtual reverse. We had to build a new physical interconnector - the Vojany-Uzhgorod pipeline - in order to start gas supplies from Slovakia. This allowed us to resist and not become completely dependent on Gazprom, ”he said.

Makogon also noted that the virtual reverse system allows significantly expanding “the possibilities for gas import to Ukraine from the EU”, which “strengthens” the country's energy security at times.

  • General Director of the Ukrainian GTS Operator Sergey Makogon
  • Facebook
  • © mcfire76

Earlier, Ukraine signed similar agreements with Poland. According to Makogon, soon the reverse will work with Hungary.

The virtual reverse scheme allows Ukraine to take back the contracted volume of Russian gas destined for Slovakia, which is transported through the Ukrainian gas transmission system.

At the same time, gas is not physically pumped back from the Slovak territory towards Ukraine, which is why the reverse was called “virtual”: blue fuel flows in one direction.

The principle of operation of this scheme in an interview with RT was explained by the Deputy General Director for Gas Problems of the National Energy Security Fund Alexey Grivach.

“The virtual reverse mechanism is such operations in which Ukrainian companies or residents formally buy gas from European traders, while physically the gas is taken simply from the transit volumes in Ukraine. And the paperwork is made out as if he entered Europe and then returned, ”he said.

Costly reverse

Recall that earlier the legality of the virtual reverse was disputed by Moscow. Ukraine and the EU insisted that such a scheme for the purchase of gas is consistent with the provisions of the Third Energy Package. In the Russian Federation, it is believed that the blue fuel transported to Europe is the property of Gazprom until it crosses the western border of Ukraine, which means it cannot be sold to Kiev as part of a reverse.

According to Grivach, this restriction in Ukraine began to be circumvented due to the construction of interconnectors - jumpers connecting different gas transmission systems.

“This controversial moment was circumvented by the construction of a pipe that actually looped a certain volume of gas between Slovakia and Ukraine,” the analyst explained.

Thus, gas formally crosses the border, but immediately returns to Ukraine, added the president of the Center for System Analysis and Forecasting Rostislav Ishchenko.

“This is not a new mechanism. Previously, gas did not leave Ukrainian territory at all, it was simply believed that it was “bought and sold,” for example, Slovakia. But then appropriate jumpers were made so that the gas formally crossed the border and immediately returned, but at a new price, ”he said in an interview with RT.

According to Ishchenko, such a scheme leads to a rise in the cost of fuel for the end user.

  • Gas measuring station "Suja"
  • Reuters
  • © Denis Sinyakov

“If you pay for gas that passes through your entire territory and then returns, then, accordingly, you pay a significant cost of its transit. A price increase is inevitable: Kiev pays for the gas itself, its delivery plus gives money in the form of margin for an intermediary, ”he said.

At the same time, the expert noted, European companies still benefit from the use of virtual reverse.

“They certainly benefit from this situation. In fact, they don’t do anything and just get money for a virtual resale of gas, ”Ishchenko believes.

Propaganda effect

In December 2019, at a meeting in the Norman format, Russian President Vladimir Putin announced that Moscow was ready to provide Ukraine with a 25% discount on gas. This statement was made against the backdrop of negotiations between Russia and Ukraine on the extension of the agreement on the transit of Russian blue fuel through Ukrainian territory. Their result was the extension of the transit agreement for the period from 2020 to 2024 with the possibility of extension for another ten years.

At the same time, Ukraine refused from direct gas supplies from the Russian Federation, and hence from the discount,. Recall that Naftogaz has not purchased Russian gas from Moscow since November 26, 2015.

At the same time, Ukraine understands that buying gas from Gazprom is more profitable than reverse deliveries, a source at Naftogaz told RT.

“The state policy of Ukraine now is not to conclude any agreements with Russia. Although buying gas from a supplier directly, of course, is more profitable than using a virtual reverse, ”RT said.

According to Ishchenko, Kiev’s refusal of Moscow’s profitable commercial offer and the choice of reverse supplies are due to political considerations.

“Ukraine wants to demonstrate gas independence from Russia. However, to demonstrate does not mean to achieve it. After all, the gas in the pipes is still Russian, ”the analyst explained.

A similar point of view is shared by Grivach.

“There are several reasons, including the propaganda aspect. They need to tell their own public that they are independent from Russia in the field of energy supplies, ”the expert said.

At the same time, deliveries on the reverse, analysts say, can last quite a long time, since the purchase of gas in Ukraine has become a political issue, which means that the search for energy suppliers depends on the domestic political situation.

A similar position is shared by the RT source in the Fatherland party, according to which Ukraine was trapped in its own anti-Russian propaganda.

“If for five years you have been inflating the hysteria that Russia is an aggressor, then how then to buy gas from Gazprom? Kiev has fallen into its own trap and is now forced to come up with ideas with a “virtual reverse”. The problem of the Ukrainian leadership is that no one is ready to make concessions even on the gas issue, ”said the deputy.

  • Gazprom building in Moscow
  • Reuters
  • © Maxim Zmeyev

Despite the fact that the Ukrainian authorities will present the signing of the agreement with Slovakia as a victory, in fact they have nothing to celebrate, the RT source in the European Solidarity party believes.

“Naturally, there is no victory here. It seems to me that people need to tell the truth that there is no “Slovak gas”. Perhaps, in this case, the society will look at things more soberly, ”the deputy believes.

Source: russiart

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