Ukraine's Maidan is the struggle for gas market

The conflict in Ukraine is a war for the redistribution of the gas market that brings billions in profits. This is not a Russian-Ukrainian conflict, but a Russian-European conflict. The European Union has missed the moment when it could have won over Viktor Yanukovych, economist Said Gafurov said in a live broadcast of Pravda.Ru.

"Gazprom shares are very volatile because of the events on the Maidan," said the expert. There is a feeling that someone is trying very hard to change the very structure of the market, displacing Gazprom. "Here it is not so much about taking away the ownership from Gazprom for nothing, although this issue can also be discussed. It is more about the destruction of the profits that Gazprom receives as a mediator, as a gas trader, and not as a supplier or as a transporter of gas passing through the huge transport network in Ukraine."

"In 2015 election will be held in Ukraine. Currently, a very small minority that includes Bandera's heirs, about ten thousand people, are trying to impose their political will on the entire society. Empirical evidence shows that governments could be overthrown through the hands of relatively small groups. Very serious economic funds are involved at the Maidan. Privates are paid $200, and higher ranks $500," said the expert.

According to Said Ghafurov, Viktor Yanukovych would have lost the 2015 election if it was not for the Maidan, and now it is not clear if he would lose." Why do people show such a tough obstinacy a year before the end of the president's powers? Why is there so much money at the Maidan?

"There is a lot of money because there is more at stake than the $15 billion promised by Vladimir Putin," Gafurov said. "This is about the so-called "Third Energy Package" of the European Union that entered into force in 2011. This document refers to the separation of the owners of pipeline systems and the owner of the gas itself.

"In many countries in Western, Central and Eastern Europe, Gazprom is now forced to provide access to their "pipe" to third parties, i.e., other vendors that wish to supply gas to Europe. If such third parties do not exist, then a part of the gas transmission capacities should still remain in reserve. That is, Gazprom cannot say that its pipes are filled with its own gas, and suggest waiting until there is room. It must pump gas of foreign firms at low rates from a large number of liquefied natural gas stations created on the coast of Western Europe," Gafurov explained.

Russia is not satisfied with this proposal because it reduces the profitability of gas projects. As a consequence, due to profit shortfalls Gazprom is exempt from paying property tax. This is why Moscow is trying to achieve the abolition of the EU's "Third Energy Package," and this is why Moscow is so patient with Yanukovych.

The expert explained that if Ukraine signed an agreement on association and voluntarily took upon itself the obligation to European standards, Gazprom would have lost the money it gained from exploitation of "insanely expensive pipelines" under a bilateral treaty with Ukraine. "Even the $15 billion loan will eventually pay off, not to mention the fact that the debt is a loan to be repaid," said Gafurov.

"I am stressing again that the main goal is not the repression of Gazprom as a gas transporter, although that is true as well, but as a gas trader seeking to profit directly from the trading process. The main thing is not the gas, not the price of gas as it exits the gas pipeline. The main thing is this network that brings major profits. There is a colossal redistribution of the gas market, and, unfortunately, we do not have enough leverage with the EU position," said the expert.

This position is "shameless" because "Third Energy Package" allows countries to cancel long-term commercial agreements signed with Gazprom. "The stakes are so high that one of the manifestations of the "Third Energy Package" was the destruction of Libya," continued Gafurov. "The attacks, the NATO bombing in Libya began in March of 2011, when its full implementation has begun. Gaddafi was known as one of the biggest supporters of the liquefied natural gas trade. "In Libya, there was an old liquefied natural gas plant, and it was building a new parallel super-complex and financed the construction of distribution centers in Germany, and now we have a global redistribution where people do not shy away from bombing, are not averse to a full-fledged war," said the expert.

Gazprom shares are unstable because Ukraine's accession to the EU standards in the sale of gas is at stake, reiterated Gafurov. According to the expert, what is good for Gazprom is good for Russia. "Considering the scale, we are very interested in Ukraine not joining the "Third Energy Package" because it is bad for the Russian economy, for the balance of payments, for exports. As for Yanukovych, he would also benefit, and if he would have asked for 20 billion, we would have given him 20, and would still benefit," said the expert.

"Yanukovych acted very cleverly as he solved his budget problems. Europeans refused to rescue him, and Russia has not. This, incidentally, is another success of the foreign policy of President Putin."

What would happen with the $15 billion loan if Klitschko and company were to come to power? Can it be blocked? Gafurov thinks it is a possibility. This loan is a sort of an agreement that Russia will buy Ukrainian securities worth $15 billion.

"Russia can sell them afterwards, drop them, bring down the market, and I am absolutely convinced that if suddenly a conditional Klitschko comes to power, he will be equally interested in this loan."

Russia is winning as long as there is no discussion about Ukraine joining the "Third Energy Package" and generally European standards. "I think Klitschko forgot about it, it was the primary goal. But those who control him remember this. Of course, they will look for another option. And, of course, people who have already spent so much money will likely be able to find the sum to give Yanukovych a chance to play it back," said Gafurov.

According to Said Gafurov, new EU standards would destroy many industries in Ukraine because they are different. "For example, the asbestos industry will die for sure because asbestos is banned in Europe. For Ukraine, it is quite significant. They will definitely make unfeasible the mines and most of all basic industries such as steel, because environmental requirements are too high, and it will be cheaper for Europe to buy products in South Africa or Australia. However, no one cares. "Even Polish politicians who reflect the interests of Polish industry openly say that it is okay if Ukrainian industry dies."

Gafurov believes that Ukraine may join the Customs Union, but if it chooses not to, it will be fine. A free trade zone with the CU can be created. "Then the Ukrainian pipes will compete with the Russian ones as they are cheaper. In The Customs Union each country has its own currency, and Ukraine will be able to manipulate its exchange rate, providing great commercial profit. The Customs Union is a market of 170 million people. This is really significant, and it has bright future, as evidenced by the fact that 40 countries have already expressed their willingness to start negotiations on a free trade zone with the CU," concluded Gafurov.

Lyuba Lulko


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Author`s name Dmitry Sudakov