Ukraine’s state oil company still transports Russian gas to Europe

A month into the war, the state gas company opens a window on the geopolitics of the conflict and the scope of destruction of Ukraine. Naftogaz serves 12 million homes, Vitrenko said, but has been forced to isolate 300,000 that have been badly damaged by Russian missiles.

“If we can’t fix them, we have to shut them down,” Vitrenko said of the gas connections. “Sometimes a whole block [can be affected]. It can also be dangerous.” In the first days of the Russian invasion of Ukraine, two company workers were killed inside a heating plant in Kherson, he added.

Naftogaz is also caught in a complex geopolitical game. Even when Russia rains down missiles on Ukraine, it still sends about 30 percent of the gas it sells in Europe through the country it has invaded. And while Ukraine’s leaders have called on the continent to immediately stop Russian gas imports, they are doing nothing to interfere with the gas flowing through pipelines in a tax of 40 billion cubic meters per year to customers such as Germany, Austria, Italy, Slovakia, Hungary and the Czech Republic.

“It is a very sensitive political issue discussed at the highest political levels,” Vitrenko said. “We are trying to persuade our partners in the European Union that they should reduce any purchase of Russian oil and gas or at least freeze all the money Russia gets from energy exports.”

He said money owed to Russia could go into escrow accounts.

Yes Ukraine unilaterally took the initiative and stopped the transit of natural gas supplies from Russia, Vitrenko said, gas supplies would be diverted to other pipelines and reach Europe anyway. That, he added, could make Ukraine even more vulnerable to Russian bombs.

“So it’s not helping us in terms of preventing Russia from getting money for its energy exports, but there’s also a greater risk to the gas infrastructure inside Ukraine,” he said. “We see it as a deterrent [against] more bombing and more destruction inside the Ukraine.”

Many energy analysts have said that Russia has maintained its shipments of natural gas through Ukraine to demonstrate its reliability as a supplier that fulfills long-term contracts. In January 2020, the two nations signed a five-year agreement for the amount now moving through Ukraine’s pipelines.

But Vitrenko said he doesn’t see it that way. “There is a simpler, more direct explanation: Russia gets $500 million to $1 billion a day from energy exports,” he said. If Russia reduces its exports, “they would not be able to finance the current war, pay the salaries of their soldiers and all the crowds that currently support Putin. It will immediately affect the regime’s support, which is why they don’t want to disrupt this revenue stream.”

Anders Aslund, a senior member of the Stockholm Free World Forum and a longtime expert on Russia affairs, said both countries benefit from keeping the gas flowing: Russia sells the gas at high prices and Ukraine charges transit fees.

“If Europe continues to import gas from Russia, why should Ukraine not benefit from it?” Aslund said, noting that the International Monetary Fund forecast last week that Ukraine’s gross domestic product could fall 13.5 percent if the fighting stops soon and up to 35 percent this year if there is a protracted conflict.

Amy Myers Jaffe, managing director of the Climate Policy Laboratory at Tufts University’s Fletcher School, said another reason to keep the gas flowing was that Russia’s state-controlled gas company, Gazprom, has commitments to corporations. in Europe.

“Gazprom would incur billions in financial contractual penalties if it fails to meet its contractual obligations,” he said. “Maybe the Kremlin doesn’t want to have to bail them out.”

Ukraine, he added, “needs and wants NATO support and therefore cannot take steps to upset the apple cart by cutting off gas supplies from Germany.”

Russia now transports some of its gas through newly built pipelines, such as one that crosses Turkey to southern Europe. In October, Russian President Vladimir Putin said the degree of “wear and tear” on Ukraine’s transportation system had led him to reduce the volume of gas in his latest deal with Ukraine.

Ukraine’s own diminishing appetite for natural gas has also played a role in gas flow over the last decade or two. It once consumed 50 billion cubic meters a year, while producing 20 billion cubic meters per year. Before the Russian invasion, it had reduced its consumption to just 30 billion cubic meters a year, reducing its dependence on imports by two-thirds.

Yet, the conflict is fueling more greenhouse gas emissions every time Russian missiles hit oil and gas infrastructure.

Less than five months ago, representatives from countries around the world met at the UN climate summit in Glasgow, Scotland, to set limits on greenhouse gas emissions. Ukraine, along with more than 100 other nations, signed the Global Methane Commitment to reduce emissions of the powerful greenhouse gas by at least 30 percent by 2030. Russia did not, even though there have been large leaks of methane from production, compressor and distribution sites along its vast network of pipelines.

A couple of months before Russia invaded Ukraine, Ukraine opened a new compressor station that cut emissions by 90 percent, Vitrenko said. There is an ongoing program to replace leaking metal pipes with modern plastic ones, he added, and Naftogaz had used robots to inspect pipes for defects in its distribution network.

“This was due less to environmental concerns, but more to economic concerns,” the Naftogaz executive said.

Now the world looks different, Vitrenko said. “This green transition should also focus on geopolitical sustainability, and it’s really intertwined with environmental sustainability.”

Recently, Russian forces shelled what Vitrenko called “pretty big oil pipelines” for several days. “We couldn’t stop the fire,” he said. “You can imagine the amount of methane emissions there.”

He said a Russian missile hit an oil depot just a couple of kilometers from the shelter where he was hiding. “So you can imagine the environmental damage,” she said.

In light of the recent fighting, Ukraine’s priorities have changed.

“The country is at war and there are still tens of millions of people in Ukraine who need heating, water, electricity and some basic services,” Vitrenko said.

This was a daunting prospect under normal circumstances. Now, she said, international donors will have to focus not only on food aid, but also on channeling aid to Naftogaz, the country’s largest state-owned utility.

“When there is a war, your expenses increase. People can’t pay,” Vitrenko said. “It is no longer a business. It’s basically humanitarian assistance.”

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