Ukraine’s Former Prime Minister Reveals ‘European’ Gas Kiev Has Been Buying is Actually Russian

Ukraine officially halted the purchase of Russian gas in November 2015 and began buying “European” gas from countries including Slovakia and Poland. Subsequent investigations have revealed that most, if not all, of the gas Kiev gets from the European Union is actually Russian, and is sold back to Ukraine at inflated prices.

Former Ukrainian Prime Minister and long-time opposition figure Yulia Tymoshenko has said that the “European” gas Kiev has been buying from its Western partners actually comes from Russia, and that efforts to obfuscate this fact constitute a form of "cruel and cynical" deception of the Ukrainian people.

“Since 2014 Ukraine has been buying gas from Russia, and everything that was said about Ukraine not buying Russian gas has been a huge, criminal deception. How can you so cruelly and cynically deceive the country?” Tymoshenko asked during an interview with Ukrainian television.

According to the politician, Ukrainian authorities buy gas from European-based intermediaries, “which pump out a fairly large amount of money” for themselves, “and receive what are in effect kickbacks from Russian supplies – from $70 to $100 per thousand cubic metres of gas”.

“They have created a fictitious loop-shaped pipeline, but the gas that flowed through it was Russian”, Tymoshenko said. “The gas goes around in a circle, and then is registered at customs”, she added.

Europe, Tymoshenko noted, simply does not have the capacity to satisfy Ukraine’s gas needs.

From Transit to 'Virtual Reverse'

Ukrainian state energy giant Naftogaz officially halted the purchase of gas from Russia’s Gazprom in November 2015, claiming that it could find cheaper alternatives elsewhere. In late 2019, the two companies penned a new gas transit agreement committing Gazprom to pump at least 40 billion cubic metres of gas through Ukraine annually between 2021 and 2024. On Saturday, a Gazprom spokesman confirmed that the company had fulfilled its annual transit obligations for 2021. Ukraine's budget receives several billion dollars from this transit arrangement.

In September 2020, Ukraine essentially returned to buying gas from Russia using a scheme known as “virtual reverse”, under which Kiev still does not buy directly from Gazprom, but no longer pumps gas to Europe and then back to Ukraine. The country's gas operators say this policy saves Ukraine between $10-$20 per thousand cubic metres thanks to reduced transportation costs. It has been estimated that as much as half of Russian transit volumes shipped through Ukraine remain in the country.

Tymoshenko is not the first Ukrainian politician to bring up the fiction of Ukraine’s independence from Russian gas supplies. Earlier this year, Opposition Platform – For Life lawmaker Viktor Medvedchuk said the same, and suggested that resuming direct purchases of Russian gas by Ukraine would cut out the European middleman and lead to savings for consumers.

Since cutting itself off from long-term Russian gas contracts, Ukraine has become dependent on short-term contracts based on the market spot price. This fall witnessed an explosion in the price of gas on European market, with prices jumping over 300 percent, according to TradingEconomics figures.

On Friday, Russian President Vladimir Putin suggested that efforts by Ukraine and other countries to stop the new Nord Stream 2 pipeline from coming online has ended up hurting their own economies, since additional gas in Europe via the new infrastructure “would undoubtedly lower spot prices on the market”.

Ukraine Facing Dangerous Energy Shortage

Gazprom announced Monday that gas reserves in Ukraine’s underground gas storage facilities had reached a “historic minimum” for December, with about 14.37 billion cubic metres in reserve, roughly 9.9 billion cubic metres less than lass year, and one billion cubic metres less than it was when reserves began to be topped up this past spring. Ukraine consumed about 30 billion cubic metres in 2020, with about half of that accounted for by household consumption for heating and fuel, and 20 percent by industry.

Last week, Naftogaz warned that the country’s coal reserves had hit “critically low” levels. The shortage of coal has threatened to knock out many of the country’s power plants and cause rolling blackouts. In mid-December, Ukrenergo said the country’s thermal power plants had about 459,000 tonnes of coal – half of what is required at this time of year. Shortages have already forced the shutdown of about 20 TPPs earlier this year.