Russian State Oil Company Seeks to Bypass Ukraine

Transneft announces plans to bypass Ukraine’s transit system.

President Viktor Yanukovich of Ukraine in Brussels, March 1, 2010
President Viktor Yanukovich of Ukraine in Brussels, March 1, 2010 (European Parliament/Pietro Naj-Oleari)

The Russian state oil company Transneft is in talks with the Czech Republic and Germany to bypass Ukrainian export routes, a company official said last week.

Transneft is responsible for Russia’s oil pipelines. Gazprom, a private enterprise with close ties to the Kremlin, recently accused the Ukrainians of taking more gas from the transit pipelines that traverse their territory than they’re allowed to. This action, said Gazprom, was to blame for gas shortages in Europe this winter although an increased domestic demand may have overwhelmed the conglomerate.

Disputes over pricing and siphoning have plagued Russian-Ukrainian relations since the collapse of the Soviet Union in the early 1990s. In more recent years, it has put Europe’s gas supply at risk, especially in winter when demand for gas rises dramatically across the continent.

Ukraine has to import some 60 percent of the natural gas it uses and more than 90 percent of its oil. By keeping supply below demand and both resources overpriced, Moscow hopes to force Kiev to trade more of its industrial assets for energy and accelerate a process of economic reintegration that stalled under the previous, pro-Western government.

The Kremlin now has a more friendly president in Viktor Yanukovich who doesn’t dream of joining the European Union or NATO. Even he is reluctant to grant Russia more control over his nation’s gas transit system however because it may be the only leverage he has over Moscow.

In a move than only put further pressure on Yanukovich, Transneft is reportedly considering plans to link the two branches of its Druzhba pipeline at their western ends.

The line, which splits into different branches in Belarus, delivers oil through Poland into Germany and across the Ukraine and Slovakia toward Prague. An interconnection, three hundred kilometers long, between the Czech and German ends of the pipeline would enable the Russians to continue to deliver oil to clients on the southern branch even if flows were stopped in transit through Ukraine.

The Europeans, who depend on Russia for roughly a third of oil and gas imports, will likely welcome the move while they look for alternative suppliers in the Caucasus and Central Asia.

While Germany championed construction of the Nord Stream pipeline through the Baltic to decrease its dependence on Eastern European transit nations, Russia’s heavy handed energy politics has prompted the European Commission to advocate closer relations with countries on the Caspian Sea. The Trans Caspian and Nabucco pipelines, financed by a consortium of Central European and Turkish energy companies, are designed to deliver Azerbaijani, Turkmen and possibly Iraqi gas to Europe, rivaling Russia’s South Stream across the Black Sea.

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