19 Jan 2009

The Case for a Gas Transit Consortium in Ukraine: A Cost-Benefit Analysis

Elena Gnedina / Michael Emerson

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The January 2009 interruptions of gas supplies from Russia to the EU via Ukraine, following the earlier 2006 crisis, has confirmed the absolutely intolerable situation in which a commodity of strategic importance for European industry and households has become uncertain and erratic, in breach of long-term supply contracts, as a result of disorderly commercial and political relations between Russia and Ukraine.
The recently agreed tri-partite (EU, Russia, Ukraine) monitoring system is a positive step, even if at the time of writing supplies have not yet resumed. But in any case this can be viewed as no more than a stop-gap measure. A more fundamental and permanent solution is required. For this purpose the authors propose that the EU, Russia and Ukraine negotiate the creation of a new business consortium to be granted a long-term concession to operate the Ukraine trunk gas transit pipeline.