In recent days Russia has deliberately pushed Ukraine to the brink, and created a still greater risk of violent confrontation. Last month Russia, a European country, annexed a part of the territory of its neighbour on trumped up pretexts and through an illegal referendum held at the end of the barrel of a gun.
UN General Assembly Resolution 68/262 on the territorial integrity of Ukraine, OP 5: “Underscores that the referendum held in the Autonomous Republic of Crimea and the city of Sevastopol on 16 March 2014, having no validity, cannot form the basis for any alteration of the status of the Autonomous Republic of Crimea or of the city of Sevastopol”.
By this act Russia violated the fundamental principles of sovereignty, territorial integrity and the right of every democratic nation to choose its own future. These principles have been built up over 70 years to avoid a repeat of the terrible conflicts of the 20th century that inflicted such grave suffering on Europe, particularly on Russia. We call on Russia to stop these actions and to condemn the lawless acts in Eastern Ukraine
This would be immensely damaging for the long term prosperity and security of all nations – including Russia – which ultimately depend on a rules-based international system. If we do not defend these principles in Ukraine, including over Crimea, they will be threatened elsewhere in Europe and around the world.
The risks this time are far greater than they were in Crimea, as Russia shifts to eastern border of Ukraine.
Pressures from Russia continue to bear upon Ukraine. That is why, on 14 April 2014, at a meeting of the Foreign Affairs Council in the European Union agreed to expand sanctions and to complete preparations for far-reaching economic, trade and financial sanctions whenever necessary in the future.
The Ukrainian economy has been in recession since the second half of 2012, with only one quarter of positive growth at the end of 2013, which was quickly reversed in the first two months of this year as a result of the deterioration of the political and security situation. The Ukrainian government lost access to international financial markets during 2013.
The Foreign Affairs Council also adopted a decision providing up to €1bn in macro-financial assistance to Ukraine to support its economic stabilisation and its structural reform agenda and a regulation granting unilateral trade preferences to Ukraine, providing for the temporary reduction or elimination of customs duties in accordance with a schedule of concessions set out in an annex to the EU-Ukraine association agreement.
The assistance (supplementing resources made available under a financial arrangement with the IMF) will be conditional on the fulfilment of economic policy and financial conditions, focusing on structural reforms and sound public finances, to be laid down in a memorandum of understanding (MOU) to be agreed between the EU and Ukraine.
The regulation granting unilateral trade preferences is expected to enter into force on 23 April, the day following its scheduled publication in the Official Journal.
It will enable Ukraine to benefit from trade preferences without awaiting entry into force of a “deep and comprehensive” free trade area included in the EU-Ukraine association agreement.
Ukraine’s main external energy policy goals are to hold down gas import prices. Gazprom supplies well over half of Ukraine’s natural gas, and Ukraine is faced with a 37% increase in the price of Russian natural gas after Gazprom recently cancelled a discount.
The main energy issues at stake are the rise of energy imports within the EU and how they impact the EU industry, the energy utilities and the consumers in the EU.
European gas market can only be the satisfactory rearrangement of transit relations through Ukraine, and a market reform of the energy system of Ukraine both on the basis of a legally and economically sound and transparent regime.
The January 2009 gas supply cut was among the most severe energy security crises in recent European history. According to FIW-Research Report, (2011) Bulgaria suffered significant economic losses. Shortly after supplies resumed, the Bulgarian government reported an estimate of the cost of the cut to the Bulgarian economy of 250 million Euro, see RIA Novosti (2009).
Industrial production fell (in seasonally-adjusted terms) in line with the share of natural gas in the energy product mix in Bulgarian industry, namely 23% for the 14-day period of the cut.
The economy- wide effect may have been in the order of 0.35% of yearly GDP, corresponding to a 9.1% GDP shortfall for the 14-day period of the cut.
However Bulgaria was rather an exception. Most EU Member States suffered no shortage at all in final domestic supply of natural gas. Redistribution between net importer countries played a more important role than increased imports from suppliers, while storage played a decisive role in several individual cases, as well as collectively.
Imports from alternative sources were however an important alleviating factor, and the role of liquefied natural gas (LNG) was particularly important: accounting for only around 10% of imports of gas in the OECD Europe region in 2008, LNG accounted for 24% of the short-term supply increase that was necessary to compensate for the shortfall in Russian supplies. This confirmed the ‘swing supply’ potential of LNG and its very useful security of supply properties.
In 2010, Ukraine agreed to extend Russia’s lease to the Black Sea Fleet base in Crimea from 2017 to 2042 in exchange for cheaper gas. One clear threat to Ukrainian economic interests was the looming possibility of losing transit fees and other related revenues from the transiting of Russian gas to Europe due to the construction of a set of Russian bypass or “transit avoidance” pipelines.
In the context of the current crisis, EU consider that solutions to both the Russian claims regarding short term arrears and the long-term mechanisms, including on the gas price and conditions of gas supplies, are to be solved in dedicated negotiations and through available legal mechanisms.
Long-term political and economic stability of Ukraine is therefore a key interest of the European Union and of the Russian Federation. European Union, together with its international partners under the framework of the planned IMF assistance package, is already providing significant support to Ukraine and its people through substantial macro- financial assistance, generous trade preferences and a variety of other aid measures agreed with the Ukrainian authorities.
The European Union is based on the rule of law. This means that every action taken by the EU is founded on treaties that have been approved voluntarily and democratically by all EU member countries. Treaties are amended to make the EU more efficient and transparent, to prepare for new member countries and to introduce new areas of cooperation. Beyond energy policy, Ukrainians free-trade agreement and an association agreement opens additional opportunities for long-term stability in Ukraine.
As supplies to the European Union and supplies to Ukraine are closely related, A letter was sent today by the President of the European Commission, José Manuel Barroso, to the President of the Russian Federation, Vladimir Vladimirovich Putin, following consultations with the 28 Member States, to reply Putins letter of 10th April.
The EU:s Member States are willing to discuss with all parties concerned how these contractual obligations are to be met on the basis of market prices, rules and international law, as it is the case in the European Union, and how to ensure that transit through Ukraine, storage of gas in Ukraine and supply to Ukraine are done in a transparent and reliable manner, writes resident of the European Commission, José Manuel Barroso
Early Warning Mechanism which was established between the European Union and the Russian Federation, following the gas crisis in 2009 and subsequently updated in 2011.
The over-arching themes are vulnerability to supply disruptions,Ukraine ‘s gas debts and import prices and measures designed to overcome them, namely interconnection and consolidation of bargaining power. Cooperation between the European Union and the Russian Federation in the energy field is based on common interests.
The contractual reliability of the Russian Federation as a supplier of gas is at stake in this matter. Remaining a reliable supplier would appear to be clearly in the interest of the Russian Federation, in the light of international gas market developments.
As regards energy, relations must be based on reciprocity, transparency, fairness, non-discrimination, openness to competition and continued cooperation to ensure a level playing field for the safe and secure supply and transit of energy. EU Member States recognise that in the case of natural gas supply and transit the need for a structured and comprehensive dialogue is particularly urgent.
“It is important to recall that in case of an emergency situation, this Mechanism should be activated before taking any unilateral steps”.
The proposed consultations should help to avoid an extreme scenario and safeguard security of supply and transit while at the same time creating the necessary conditions for a structured cooperation including notably the modernisation of Ukraine’s gas transit system.; writes the President of the European Commission, José Manuel Barroso, in his letter today to the President of the Russian Federation, Vladimir Vladimirovich Putin
In this respect, EU is deeply concerned by the unilateral decision taken by the Russian Federation not to apply the 2010 Kharkov agreement. Such consultations should not exonerate economic operators from fulfilling their contractual responsibilities and thus should be conducted without prejudice of commercial negotiations.
The European Union remains ready to support facilitating dialogue between Ukraine and Russia. In addition to this mechanism EU stand ready to host trilateral consultations with the Russian Federation and, subject to the agreement of the Ukrainian government, with Ukraine as EU have proposed already in the past.
Agence France-Presse May 1, 2014
– The European Union said talks with Russia and Ukraine will take place in Warsaw on Friday to try to resolve the row over the money that Gazprom calculates Kiev owes.
Further progress has been achieved. May 31 2014 – Statement after the trilateral meeting between the EU, Russia and Ukraine on energy security
– On Friday (30 May) afternoon a trilateral meeting on energy security between EU Energy Commissioner Oettinger, Russian Energy Minister Novak and Ukrainian Energy Minister Prodan took place in Berlin. On the basis of that the parties agreed to come together for further discussions on Monday in Brussels. The aim is to find a solution on prices and payment schemes.