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    Ukraine Gas Shut-off: A Question of When

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Summary

Eurasia Group's Leslie Palti-Guzman says that a shut-off of natural gas supplies to Ukraine is inevitable, but the timing could be for better or worse.

by: Drew S. Leifheit

Posted in:

Natural Gas & LNG News, News By Country, Russia, Ukraine, Pipelines, South Stream Pipeline, Top Stories

Ukraine Gas Shut-off: A Question of When

In a breakfast briefing session at the European natural gas event Flame in Amsterdam, the Netherlands, Leslie Palti-Guzman, Senior Analyst, Global Energy & Natural Resources Practice at global political risk consultancy Eurasia Group, spoke of numerous major risks faced by the natural gas industry going forward, specifically addressing geopolitical happenings related to Russia, the major supplier of gas to Europe.

Ukraine, she said, was one of the risky countries around the world which was at the risk of disruption of the flow of gas in the coming months or years.

Ms. Palti-Guzman explained, “Ukraine, of course, comes to mind because of the events of the past 2 months and we see as a major threat the fact that Gazprom had requested Ukraine to pre pay for its gas, potentially in early June – there could be some cut in supply of gas to Ukraine, but that could also impact the European market, although that would be for a short period of time.

“We see this risk as inevitable, but is not a major threat right now for the European Union market, because of the timing: we're heading into summer; however, it's more problematic if the cut-off comes later in the year, especially around winter if the EU needs to replenish its storage inventories with the winter coming up.”

She also spoke of how it was now more likely that Russia's South Stream pipeline would come to fruition, recalling, “For many years there were major uncertainties about the feasibility of this pipeline, but Gazprom and Russia have pushed it and for a long time it was in competition with the Nabucco pipeline. The main driver for the pipeline was politics and the will of Vladimir Putin to make this project happen.”

Finally, A political agreement expected this week between Russia and China she described as a highly politicized deal that went well beyond energy and gas. “Potentially, this is to frame a strategic relation between Russia and China and the momentum for this deal is really critical for Russia, which needs this symbol at this moment to show the West that, despite the sanctions they are putting on Russia, that it is able to forge economic ties with a major economic power at a time when they are very challenged in their European gas market and have alternatives to it,” commented Eurasia Group's Leslie Palti-Guzman.

Drew Leifheit is Natural Gas Europe's New Media Specialist.