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Energy Expert: Ukraine Unable to Avoid Severe Gas Shortage During Winter

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Only weeks before the beginning of the heating season, Ukraine is still not receiving gas from Russia, and is facing a gas crisis in the upcoming winter months, Pierre Noel, senior fellow for economic and energy security at the International Institute for Strategic Studies, told RIA Novosti Thursday.

WASHINGTON, September 24 (RIA Novosti), Lyudmila Chernova - Only weeks before the beginning of the heating season, Ukraine is still not receiving gas from Russia, and is facing a gas crisis in the upcoming winter months, Pierre Noel, senior fellow for economic and energy security at the International Institute for Strategic Studies, told RIA Novosti Thursday.

"It is almost impossible to have a credible scenario where Ukraine can avoid a severe gas shortage during the winter. They are in a very difficult situation now," Noel said.

"The fact that they've not received any gas from Russia since the middle of June means that were not able to fulfill their storages as they usually do during the summer, and as a consequence they will not be able to rely on gas in storages during the winter when gas consumption is at its highest," the expert explained.

Noel noted that from a broader perspective, it's a situation that has more structural reasons, namely the fact that Ukraine as a large industrial base is not competitive unless it has cheap energy.

"Ukraine was able to demand cheaper gas from Russia, which is now over because Russia and its European partners have invested in pipeline systems that bypass Ukraine and make it possible for Gazprom to reach their European customers without going through Ukraine," according to the expert.

Noel underlined that bypassing Ukraine fundamentally changes the situation, since the country is losing its huge transit revenues.

"Besides, the rent that Ukraine was extracting from Gazprom by demanding cheaper gas or not paying fully for it is also disappearing. So, it is a very transformative development which structurally weakens Ukraine in its gas relationship with Russia," he asserted.

The expert emphasized that it would be in everybody"s interest today to keep the issues of the security crisis and the management of Russia-EU gas separate and to continue building the South Stream gas pipeline.

In mid-June, Russia's Gazprom introduced a prepayment system for gas deliveries to Ukraine due to Kiev's gas debt of around $5.3 billion.

Russia, Ukraine and the European Union have held talks on gas issues but are yet to reach any breakthrough results. Kiev is insisting on a dramatic reduction in prices for Russian gas and has refused to clear its debt.

Russia has proposed a temporary gas price of $385 per thousand cubic meters for the period of consideration of the mutual claims of Gazprom and Naftogaz. For its part, Kiev proposed two optional prices: $300 per thousand cubic meters in summer and $380 in winter; or the price should be linked to the European spot market.

Ukraine is a transit country for Russian gas. Around half of the Russian gas imported to the European Union in 2013 crossed Ukraine, which amounts to approximately 15 percent of European consumption, according to the International Energy Agency.

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