Kobolyev on the risks of launching Nord Stream 2: losing $3 billion will be painful

Ukraine must continue working towards counteracting Nord Stream 2, or at least to provide a compensatory mechanism if it is launched. It is also necessary to avoid a rollback of reforms in the oil and gas industry and ensure sufficient gas stocks in storage.

The ex-head of Naftogaz Andriy Kobolyev told about this in an interview with NV, Kosatka.Media reports.

He explained he had made several conclusions while working towards countering Nord Stream 2 and protecting Ukrainian gas interests. The first thing he found out was that Germany promoted this project, even with shady methods, because this was a way to make a lot of money. The second is that various pro-Russian groups are working way effectively in Ukraine to promote the Russian narrative that Ukraine is “a fail state”.

“We tried to make the Germans and Europeans have a pragmatic answer to the question: Why should we help Ukraine, perhaps even to the detriment of relations with Russia? There was a great idea to involve a foreign partner in the process of unbundling the Ukrainian gas transmission system. But the Ukrainian government back then did everything it could to bury that option at the very beginning. They took control and then led everything to a blind corner. Another unpleasant conclusion was that different pro-Russian groups are working very effectively in Ukraine, bringing evidence to the narrative of Russians that we are a fail state. If there were several large foreign partners in this project now, the conversation with both Europe and America would have been structured in a completely different way. German companies would be those lobbyists who would say to both the White House and colleagues in Berlin: “Uh-hey, what are you doing? You are killing our investment, how come?!” Kobolyev explained.

He also emphasized that the completion of Nord Stream 2 was not the worst development of the scenario. It will be worse if Nord Stream 2 is built, and no compensatory mechanism for Ukraine is made.

"If there was an interest in their business, I am 99% sure that we would have already received some much more intelligible proposals on how the financial losses will be compensated," the ex-head of Naftogaz said.

He believes that Western partners will begin to create this mechanism because Ukraine means something to them, we are important for them. But Western partners will not do anything by themselves. We need to negotiate with them and give them options.

“Nothing good comes naturally by itself. The West is ready to help Ukraine if Ukraine moves towards the Western world,” Kobolyev said.

The third thing concluded is that the White House in the United States considers us partners and is trying to help us. But at the same time, they are always in a difficult choice. Because Germany, which is the locomotive of the European Union's economy, the most influential country in the European Union, is actively fighting to preserve this project.

“The main driver that helped the Ukrainian interest to direct the White House more towards Ukraine has always been the parliament, the Senate and Congress. It is way important to demonstrate reciprocity. We have always been guided by this logic. Ukraine managed to diversify and get away from gas supplies from Russia in 2014, Ukraine managed to launch a gas market reform, Ukraine was able to successfully carry out an unbundling, Ukraine successfully launched a corporate reform in Naftogaz, etc. This reciprocity allowed us to keep the project in different ways at different stages for long enough,” he said.

Kobolyev recalled that Naftogaz really hired companies through the Federation of Employers of the Oil and Gas Industry of Ukraine that absolutely officially reported that they were lobbying for the interests of Ukraine.

“The effectiveness of these efforts and the money spent can be easily assessed. This is an issue of the money invested in the result. Every day the Nord Stream 2 deferral, when the transit contract was $3 billion a year, allowed us to save $8 million a day in revenue. And if, God forbid, Nord Stream 2 takes is launched, then only legal guarantees that the Russians will continue to transport gas through the territory of Ukraine, even within the framework of the current contract, remain,” he said.

Ukraine needs to try, if not stop Nord Stream 2, then avoid a worse option – launched Nord Stream 2 without a counter-deal in Ukraine. This may definitely happen now, Kobolyev is sure.

“I know for sure that the White House is currently discussing what kind of deal could be. There are mechanisms when, for example, the Russians are guaranteeing additional volumes and additional contracts not for the remaining term of the contract, but another five years. And if these guarantees are provided, in the event of their violation, Ukraine will not be appealing to courts for four or five years but will receive money immediately. This is a specific pragmatic real goal. It needs to be discussed, it needs to be dealt with, and it makes sense to spend time, money, efforts of lobbyists and politicians on it. Because losing $3 billion a year is, unfortunately, quite realistic. And it will be painful," Kobolyev said.

To ensure the energy independence of Ukraine, the first task for the current year is the sufficiency of gas stocks.

“The presence of a large volume of gas owned by private traders is, on the one hand, very good. But if events on the market push them to enter Europe, then this volume will have to be replaced by the Ukrainian side. This is a) a lot of money, b) we are not sure they will be able to quickly buy and pump it, c) if the volume is insufficient for this winter, we can face a situation of deficit," Kobolyev explained.

From the point of view of energy security, this is a task as immediate and critical as stopping Nord Stream 2. There are six months left. Along with the possible completion of Nord Stream 2 and a shortage of gas in the underground, Ukraine may face a bad position.

However, strategically, production and energy efficiency are essential for Ukraine's energy independence, Kobolyev emphasized.

“If you have $1, and you can invest it in production and get one cubic meter of gas, or invest it in modernizing a CHPP and reduce consumption by two cubic meters of gas, then you need to do choose the second option."

Energy-efficiency issues in terms of the multiplier effect within the state can be even more interesting and socially correct than production. As regards the use of the Ukrainian labour force, which, as I understand it, is what the President is trying to achieve, creating additional jobs and raising the Ukrainian economy into a post-crisis,” Kobolyev said.

The full text of the interview available via the link nv.ua.

Tags: gas, Naftogaz, Nord Stream 2, Kobolyev, pipeline, gas transmission system

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