​Ukraine ‘hasn’t got the legs to stand on’ to force lower gas price

Reuters / Gleb Garanich
Ukraine has hardly any currency reserves left and the government is playing hardball towards Russia counting every penny in a deal they apparently can’t afford, Ben Aris, chief editor of Business New Europe, told RT.

“Paying for imported gas is a major outgoing. They are counting every penny they have in order to get through this period,” he said. “There are no imports of Russian gas at the moment so they’re playing hardball and they’re holding out for as lower prices they possibly can get.”

The Ukrainian government has taken up a peculiar attitude in forcing a lower gas price, as it tries to squeeze out the maximum with least damage to its collapsed economy, he said.

“They really haven’t got the legs to stand on, so it’s a very tricky position in the negotiations for Ukraine. The bottom line they’re arguing is ‘we don’t have money to pay so you have to meet us half-way’.”

Ukraine has only two months of hard-currency reserves, which is barely enough to keep their national currency stable, so the government remains steadfast in requesting the easiest terms, he said.

READ MORE: Gazprom halts gas deliveries to Kiev – CEO Miller

“Forking out several billion dollars a month for gas imports is not really viable, given that they barely got $8 billion in total in the bank and they can’t really afford to touch them without causing another meltdown of the local currency,” Aris said.

The whole energy security of Europe still hinges on Ukraine, said Aris adding that it’s the actions of the Ukrainian government that pose a risk to regular supplies.

“Half of the gas comes through the Ukrainian pipeline and the danger is that they end up doing a deal they cannot afford,” he said. “Before in the past what they’ve done was simply siphoning off the gas they needed to run their own economy, and that led Russia to cut off the supply.”

Given the fact that the only gas Ukraine receives from now on is reverse supplies from Slovakia, the question whether Ukraine can become completely independent in energy, remains relevant.

On the one hand, Ukraine possesses plentiful supplies of shale - there’s a huge basin of shale gas that starts in Poland and runs into Ukraine, Aris said.

“It is possible that they can develop that – some 20-25 percent of the gas they consume already is produced locally and those resources could be further developed.”

There are lots of coal supplies in Ukraine as well, so another option they could have is switching from gas to coal, although it’s a dirty fuel and switching to it would require dramatic operative modernization of the coal plants to make sure it had less negative impact on the environment.

However, the government has made no noise at all about turning to coal as an alternative to gas, he stressed.

Moreover, whenever it comes to talks about other alternative sources, such as building a nuclear power station, it turns out that the nuclear fuel and uranium Ukraine needs to run those stations again comes from Russia. “It is still expensive and I don’t think it’s a long-term solution,” he said.

Aris says that no matter what option Ukraine chooses to improve its energy industry, it will continue to depend on Russia in various ways.

“At the moment they just try to reduce the amount they buy from Russia by re-routing gas from their neighbors Hungary and Slovakia and Poland,” he said. “But the bottom line is that they will always be importing some Russian gas.”

The statements, views and opinions expressed in this column are solely those of the author and do not necessarily represent those of RT.