Critical Months Ahead - Global Diplomacy Will Have to Solve Ukraine, Iran Issues
As Naftogaz and Gazprom signed a 3-month extension for the so-called “winter package” on Thursday, Ukrainian politicians stepped up their efforts to obtain “defensive weapons” from the European Union, voicing their fear that Moscow is pausing operations to prepare for the next phase of confrontation.
A few hours before Iran and the six world powers reached a framework agreement on curbing Iran’s nuclear program, the Russian and Ukrainian energy companies signed a technical addendum.
Naftogaz and Gazprom extended the Brussels agreement until the end of June 2015. According to Naftogaz, Ukrainian consumers will pay $248 per thousand cubic meters over the coming three months.
The contract expires on the same day set as a deadline for the final deal with Iran.
APRIL - JUNE 2015: AN EXTREMELY IMPORTANT GEOPOLITICAL PERIOD
On Wednesday, the Ukrainian government did not waste time, asking support from the European Union, Germany and the US.
According to Ukraine’s Prime Minister Arseniy Yatsenyuk, the war in Eastern Ukraine is about to restart.
“They get additional lethal weapons, new tanks, artillery systems from Russia, we are aware that they want to buy time” Yatsenyuk said in Berlin on Wednesday, referring to “Russia-backed terrorists.”
Yatsenyuk’s requests came a few hours after Ukraine’s President Petro Poroshenko got rid of Igor Kolomoisky, who resigned as governor of the Dnepropetrovsk region after a standoff in which armed men loyal to him occupied the headquarter of a state-owned firm he had a minority stake in. Kolomoisky has poured millions to prepare a regional army to stave off attacks coming from Luhansk and Donetsk.
RUSSIAN BANKING REFORM NEEDS AT LEAST THREE MONTHS, SAYS SOURCE
According to a source in the banking sector who asked not to be named, the coming three months will be relevant also for another reason. Russia is trying to promote a consolidation of its banking sector. Moscow could have a first taste of the on-going reforms in three months, striking a preliminary balance of its attempt to increase efficiency in its banking sector.
“I think that Russia needs time to understand how things go. Moscow is trying to reform its banking system, and it will take time. In the next three months, Russian authorities could have a first indication of the effectiveness of their efforts” the source told Natural Gas Europe.
According to the Bank of Russia’s website, Moscow decided to revoke 10 banking licences in the last month.
DEAL BETWEEN NAFTOGAZ AND GAZPROM
Naftogaz said on Thursday that it signed a deal to extend until the end of 2015 the pricing mechanism, the payment regime and the principle of a flexible ordering envisioned in the so-called “winter package.”
“This short-term extension of the winter package gives the parties additional time [to] develop a longer-term solution” Naftogaz CEO Andriy Kobolyev commented in a note.
The parties confirmed the need of an additional agreement, which should set the framework for the supply of Russian gas to Ukraine until the Arbitration Institute of the Stockholm Chamber of Commerce (SCC) will issue a final ruling in the dispute between Gazprom and Naftogaz.
Both companies lodged cases to review their gas contracts. According to Kobolev, the SCC could take a decision as soon as the beginning of 2016.
KIEV REQUESTS SUPPORT FROM GERMANY’S ANGELA MERKEL
"The diplomatic, political, financial and economic means of resolving the Donbas conflict must be backed up by the Ukrainian military's defensive capabilities," Yatsenyuk said in Berlin on Wednesday.
As reported by his office, he also stated that the Minsk deal is the only agreement that remains “on the table” and that, at the moment, there are 30,000 ‘Russia-led terrorists and Russian regular troops, as well as hundreds of new Russian tanks in Eastern Ukraine.’
RISKS OF RENEWED MILITARY CONFRONTATION, SAYS INTERNATIONAL CRISIS GROUP
Yatsenyuk’s position is coherent with a report released by the International Crisis Group, a Brussels-based organisation led by Jean-Marie Guéhenno.
‘Many officials locally and in Kyiv, Moscow and the West … believe war could resume in Ukraine’s east within weeks’ reads the overview of the study conducted in Kiev and Brussels.
In a separate statement released on Wednesday, the Belgium-based organisation asks the Kremlin to fully implement the Minsk II agreement, promoting a demilitarisation of eastern Ukraine and accepting deployment of OSCE monitors.
In the same document, the International Crisis Group argues that bodies like the NATO-Russia Council failed to address the Kremlin’s fears of a NATO’s expansion to the east. It goes on, saying that the crisis poses a serious threat for a peaceful resolution of the arm-wrestling between Russia and Western powers, reminding that both fronts have enormous nuclear-weapons capability at their disposal.
‘Russia’s tactics in Ukraine – both the annexation of Crimea and military backing of forces in eastern Ukraine that it denies but does little to conceal – signal a departure from its traditional diplomacy, which has tended to anchor policy in international law. If an emboldened Moscow continues to employ these tactics in Ukraine or resorts to them elsewhere in its near abroad, there would be a high risk of conflict escalation – and its certainty in the case of aggression toward a NATO member’.
Sergio Matalucci
Sergio Matalucci is an Associate Partner at Natural Gas Europe. Follow him on Twitter: @SergioMatalucci