Ukraine needs to negotiate with Russia to resume gas supplies

20 february 2017 | Rossiyskaya Gazeta

The Ukraine faces shortage of energy raw materials and another round of social tension. “The main energy sources in the Ukraine are coal, gas and nuclear power plants. The gas situation is rather bleak, and the only choice is to negotiate with Russia to resume gas supplies. Otherwise, there may be risks for gas transit to Europe that will create problems for the Ukraine," said Irina Pominova, Deputy Head of Department for Fuel and Energy Sector of the Analytical Centre.

Irina Pominova
Irina Pominova
Department for Fuel and Energy Sector

There are no many options regarding coal as well; they need either to renew coal supplies from the currently blocked areas which are beyond the control of Kiev or to increase imports from Russia, clarified the analyst in her interview with Rossiyskaya Gazeta.

Despite the statements made by the Ukrainian authorities last year that Kiev might refuse to import coal from Russia, the amount of export supplies was recovered, noted Ms. Pominova. According to the State Fiscal Service of the Ukraine, the country's own coal production last year amounted to 40.86 million tons, the export took 0.56 million tons (mainly anthracite), and 15 million tons were imported (mainly coal coke). In monetary terms, almost 62 percent were spent on supplies from Russia, another 14 — from the United States. “If it's profitable for the Ukraine to buy coal from Russia, since 87% of export from Russia is thermal coal," said the expert.

As a possible alternative, the analyst mentioned purchases from other world suppliers, recalling that the Ukraine already resorted to such measures during the winter 2015-2016, but at that time it was more of a political decision. The Ministry of Energy and Coal Industry of the Ukraine recognize that this is not the most opportune time for procurement. “There have already been doubts about how expensive is to buy coal from the United States, South Africa and Australia, however, now it is not about the price. What is more important, that South Africa, for instance, does not have these large volumes of coal,”  added Ms. Pominova. “In addition, 2015 fiscal year was a difficult period: world market prices fell sharply, and in 2016 the market faced their almost double recovery. That is, purchasing from other suppliers will be more expensive."