Third Energy Packet is not so frightful

By Vestnik Kavkaza

Last week the Verkhovna Rada of Ukraine adopted a governmental draft requiring the participation of investors from the EU and the USA in management of the gas transport system of Ukraine. Kyiv thinks that modernization and reorganization of the gas transport system will improve the position of Ukraine as a transit country. According to Vedomosti, the Ukrainian government has already agreed to the establishing of the public joint companies “Mainstream Gas Pipelines of Ukraine” and “Underground Storages of Ukraine”, which belong to the state. Naftagaz and Ukrtransgaz are recommended to take measures on making amendments to contracts on transit of natural gas through Ukraine, according to the requirements of the Third Energy Packet.

It is well-known that Russia and Europe have different views on the document. According to the European Commission, the Third Energy Packet will improve competition in the market and enable new players to enter the market and will decrease energy prices. Gazprom thinks that the packet is aimed against Russia's concern as the main gas exporter to Europe.

However, not all experts in Moscow stand against the document. Konstantin Simonov, Director of the National Energy Security Fund, says that he is an ardent supporter of the Third Energy Package in Russia. “The Third Energy Package is favorable to Russia, because it allows Russia to save funds which would otherwise be spent on buying European gas infrastructure, if the document is implemented fairly. The idea of the Third Energy Package is to secure market competition so that gas delivering companies are able to sell gas to final buyers directly. Gazprom has always wanted that. The main question, however, is whether the document will be implemented fairly or not. The same is true for South Stream or Nord Stream as well. Some people think that Russia is trying to exclude these projects from the Third Energy Package. This is not entirely true.”

Simonov calls for a sane approach. “We suggest that Ukraine should be excluded from the gas-delivering system as an unreliable partner. We can't face this problem over and over again. The construction of the South Stream means that Russia is ready to claim responsibility for providing gas to Southern European countries. We have already signed the necessary contracts. The point is that the parties should be sensible. Unfortunately, our partners in Brussels often fail to prove their common sense. They are biased and afraid of Russia, which is allegedly trying to dominate Europe,” the expert says.

On November 1st the membership of the European Commission is going to be changed. Simonov hopes that the next commission will be easier to deal with, if they are sane enough.

Sergei Pikin, Director of the Energy Development Fund, thinks that any new producers will be interested in both South Stream and Nord Stream. “I think the issue touches upon not only the EU regulations, but also the problem of liberalization of gas exports I think it would be a clear message to the EU if we allowed other companies, not only Gazprom, to export gas. For example, such companies as Lukoil and Rosneft. They would be able to take part in these projects. In fact, the gas issue concerns not only Gazprom itself, but the Russian budget, which depends on oil and gas exports by 50 percent. I believe Gazprom will eventually have to follow the EU rules.”

Pikin doesn't think that the EU will agree to exclude South Stream from the Third Energy Package: “The internal political positions change quite often. Right now Austria is backing the project, but it may happen that after the next elections the situation will change dramatically. Bulgaria is changing its position on the project every time a new cabinet is formed. This is why I believe that Russia have to not only hold talks with European officials, but also liberalize its policy towards exports. This will be beneficial for both the Russian budget and the implementation of these projects. Of course, this will mean that Gazprom will earn less, but it will be by all means better for the Russian budget than if these projects are cancelled.”