Hungary cuts gas supplies to Ukraine, EU proposes deal on Ukraine-Russia gas dispute

Written by on September 26, 2014 in Europe - Comments Off on Hungary cuts gas supplies to Ukraine, EU proposes deal on Ukraine-Russia gas dispute

Hungary’s natural gas transmission company FGZS suspended gas supplies to Ukraine on the eve of September 26 talks in Berlin between the European Commission, Ukraine and Russia intended to find a solution to the Russia-Ukraine gas dispute.

The suspension by the Hungarian company was confirmed by statements by FGZS, Hungary’s ministry of national development and Ukraine’s Naftogaz, though the full reasons for the abrupt suspension were not immediately clear.

On September 26, Hungary’s ministry of national development said that the government was
“implementing further measures to accelerate preparations for the winter season to enhance the security of the Hungarian population’s gas supplies”.

Replenishing gas storage facilities is a primary objective, the Hungarian ministry said.

“The country’s gas supply is secure, the volume of the security gas reserves conforms to the relevant regulations, the stocking level of storage facilities currently stands at 56.6 per cent, and the replenishment of stocks is being accelerated as of this point in time,” the ministry’s statement said.

In a brief statement, GGSZ said that it had interrupted the gas transmission to Ukraine through the separate pipeline from Testvériség (Brotherhood) pipeline on the afternoon of September 25 2014 “for an indefinite period”.

Hungarian news agency MTI quoted prime minister Viktor Orban as telling public radio Kossuth on the morning of September 26 that Hungary’s natural gas stock stood at nearly 60 percent of the capacity of storage facilities, and added that the government would speed up the purchase of further reserves.

“We will need a large amount of gas to further increase the gas we have already on stock. We will get that amount, as agreed with (Gazprom CEO) Alexei Miller,” Orban said.

In its response, Ukraine’s Naftogaz noted that the suspension of gas supplies by the Hungarian firm had come a few days after the talks between Miller and Orban on September 22.

Ukrtransgaz has a contract with FGSZ which regulates the flow of gas between Ukraine and Hungary in both directions. The two operators do not have a standard interconnection agreement, although Ukrtransgaz has repeatedly requested to sign one, in accordance with requirements of the Energy Community regulations, Naftogaz said.

Naftogaz said that it had a supply contract with Western European private companies to supply gas to Ukraine via Hungary.

Thursday afternoon, FGSZ stopped supplying these private companies with transit capacity and subsequently, the flow of gas from Hungary to Ukraine ceased.

“The flow of gas from Ukraine to Hungary has not been affected at present,” Naftogaz said.

“FGSZ was not available to provide any additional information about the reasons and the duration of the interruption to either Ukrtransgaz or Naftogaz. According to Naftogaz information, the Western European gas suppliers have not received any plausible explanation of the current situation from FGSZ either.”

The Ukrainian gas company said that it “deeply regrets this decision of FGSZ and calls on its Hungarian partners to respect their contractual obligations and EU legislation. Such a decision goes against the core principles of the European Union single energy market”.

Naftogaz called on the EU “to ensure a collective solution to the energy security of Europe and the respect of EU internal rules”.

“Neither EU countries nor Ukraine should be put under political pressure through energy blackmail.”

Naftogaz said that it hoped that such a sudden halt will not have any unexpected effects on the Ukrainian transit system stability.

“Naftogaz is committed to being a reliable partner and vital transit hub for Russian gas to the EU. In return, Naftogaz expects its European partners and neighbors to respect their contractual obligations, as well as EU legislation.”

Ukraine has been receiving gas from Hungary, Poland and Slovakia since Russia cut off supplies to Ukraine in July, citing a dispute over unpaid bills. This is against a background of deep tensions between Kyiv and Moscow over Russia’s actions including its illegal annexation of Crimea and many other episodes in the continuing conflict of recent months.

Meanwhile, on September 26, Ukrainian deputy prime minister and regional development minister Volodymyr Groysman told local media that the most important issue in the autumn-winter period was to provide kindergartens, schools, hospitals and the “residential sector” with heat, a Ukrainian government media statement said.

Groysman said that reverse gas from Europe would help reduce lack of natural gas during the cold weather. To replace natural gas in Ukraine, a million tons of fuel oil would be used, he said.

He called on Ukraine’s citizens to cut their energy consumption.

“It is a challenge to everyone, a challenge to our national security and independence. I am convinced that we will survive this winter and will do our utomost to ensure that everything is going to be okay in Ukraine,” the Ukrainian government media statement quoted Groysman as saying.

Separately, on the afternoon of September 26, news agency reports said that European Energy Commissioner Guenther Oettinger had proposed at the Berlin talks a deal whereby Ukraine would undertake to pay $2 billion to Russia by the end of October and a further $1.1 billion by the end of December, in return for which Russia would supply gas to Ukraine during the winter.

The gas dispute has caused widespread concern in the region, with countries including Bulgaria officially expressing concern about the risk of supply problems.

Bulgaria’s caretaker government has been working to be able to implement contingency plans, going by recent statements by members of the cabinet.

On September 25, caretaker Prime Minister Georgi Bliznashki said that the Bulgarian government had accurate estimates of available gas quantities.

He said that on his orders at the beginning of September, Bulgaria’s gas storage facility at Chiren was being filled, “so that we can have maximum reserves and be prepared for a possible gas crisis”.

“We are doing everything possible to prepare for the worst possible scenario,” Bliznashki said, according to a Bulgarian government media statement.

(Photo: jarpur/sxc.hu)

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