As the main state-owned company on the front lines of defending Ukraine’s energy security, Naftogaz’s chief executive and two of his advisers are in Washington, D.C., in a last-ditch bid to keep Russia’s Nord Stream 2 pipeline from being completed.
Naftogaz spokesman Maksym Biliavsky said that “the main goal of the Naftogaz delegation is to convince the U.S. senators to submit new legislative changes that will require the application of U.S. sanctions directly against Nord Stream 2 AG and the company’s managers.”
The delegation’s trip comes after President Volodymyr Zelensky criticized U.S. President Joe Biden for waiving sanctions against the main company involved in the construction of the $11 billion, 1,230-kilometer pipeline under the Baltic Sea capable of carrying up to 55 billion cubic meters directly from Russia to Germany, bypassing Ukraine.
When combined with the existing Nord Stream pipeline, the Russian-German transit capacity doubles to 110 billion cubic meters, prompting fears that Russia will no longer pump gas through Ukraine’s pipeline when a current agreement expires at the start of 2025. Under the agreement, the Kremlin must send at least 40 billion cubic meters of gas yearly through Ukraine, bringing about $7 billion in transit fees over the life of the five-year contract.
Addressing Kyiv’s ongoing concerns over how Nord Stream 2 could make Ukraine more vulnerable to a deeper Kremlin military invasion, Germany has expressed support for Ukraine remaining a transit country for Russian gas to the European Union. But it’s not clear how Germany or anyone else will force Russia to ship gas through Ukraine.
So, while the project is not yet done, Zelensky and Naftogaz are trying to rally the West to at least get firmer agreements from Moscow before the pipeline is completed. Russia has said the project, 95% complete could go online this autumn.
The companies pushing for the project’s completion, led by Gazprom and Germany’s Uniper, also include Wintershall Dea, a unit of BASF, Anglo-Dutch Shell, Austria’s OMV and French-based Engie.
Russian President Vladimir Putin, besides waging a bloody war since 2014 against Ukraine, is already blackmailing Ukraine. During the St. Petersburg International Economic Forum on June 4, Putin said Russia would “need goodwill on the part of our Ukrainian partners” to maintain Kyiv’s long-term status as a transit country.
Nord Stream 2 would, at a minimum, lead to a reduction in transit fees paid to Ukraine. But Ukraine fears a deeper Russian military invasion as soon as the Kremlin no longer needs Ukraine’s gas pipeline. Col. Kyrylo Budanov, chief of Defense Intelligence of Ukraine, told the Financial Times last month that “the existing Ukrainian gas pipeline not only performs a transport function but also acts as a protection for Ukraine from possible aggression by the Russian Federation.” He added: “At the same time, for Russia, Nord Stream 2 is only a tool for manipulating and achieving dominance in Europe.”
Speaking from Washington, Naftogaz CEO Yuriy Vitrenko told Ukrainian television channel ICTV on June 9 that the company is collecting evidence of Russian state-owned Gazprom’s dominance on the EU gas market. He complained that the Russian gas company hasn’t let gas sourced from Central Asia through Ukraine.
“It was necessary to establish new facts of violations, file a complaint with the European anti-monopoly [anti-trust] authority and submit to a new [international] arbitration [court]. This is what we are doing now,” Vitrenko said.
Vitrenko’s adviser, ex-member of parliament Svitlana Zalishchuk, says the pipeline project is a purely geopolitical project, rather than a commercial one, designed to harm Ukraine’s national security interests. Ukraine’s vast gas pipeline system is already “operating at 35 percent capacity,” she told the Kyiv Post from Washington.
The pipeline, Zalishchuk said, is just another weapon “in the Kremlin’s arsenal.” She said Gazprom has spent $200 billion on new gas pipelines in the last 10 years, including Turkstream and Power of Siberia, even though “their occupancy rate averages about 40%.”
Myron Wasylyk, a Ukrainian-American specialist in public relations and now an adviser to the Naftogaz CEO, told the Kyiv Post that Nord Stream 2 “without a doubt, will be used as a political by the Kremlin to dictate its political agenda in Europe.”
He continued: “Moreover if the Nord Stream 2 pipeline comes online it will leave Ukraine more vulnerable to Russian military aggression, as the Kremlin has no vested interest in keeping Ukraine’s pipeline operational and competitive with Nord Stream 1 or Nord Stream 2.”
Serhiy Makohon, who heads the Ukrainian state-owned Gas Transmission Operator, said the cost could be several billions of dollars a year for Ukraine when the loss in transit fees is combined with the need to pay transit fees for gas from Germany.
Besides Ukraine, many EU countries, including Poland and the three Baltic countries of Estonia, Lithuania and Latvia, have opposed the project.
The previous U.S. presidential administration of Donald Trump toughened sanctions on the project, but Biden approved waivers on the company that heads the project. Speaking to White House reporters on May 25, Mr. Biden said it would “be counterproductive in terms of our European relations and I hope we can work on how they handle it from this point on.”
In turn, German Chancellor Angela Merkel has repeatedly promised to safeguard Ukraine’s role as a gas transit country by vowing to hold talks with Russia, which have yet to take place. As recently as June 6, German government spokesperson Steffen Seibert said: “For the German government it remains central that Ukraine should remain a transit country even after Nord Stream 2.”
Yet with no assurances on how Ukraine’s transit status could be enforced, Zelensky said he was surprised and disappointed by the U.S. president’s move. In an interview with HBO’s Axios media outlet ahead of his telephone conversation with Biden on June 4, Zelensky said: “This is a weapon, a real weapon … in the hands of the Russian Federation…It is not very understandable … that the bullets to this weapon can possibly be provided by such a great country as the United States.”
Three days later, Zelensky and Biden spoke over the phone during which the U.S. voiced “unwavering…support for Ukraine’s sovereignty and territorial integrity.” The Ukrainian readout of the conversation said that Biden “was against the implementation of the Nord Stream 2 project” and that “for his part, Volodymyr Zelensky emphasized Joe Biden’s attention to the fact that Nord Stream 2 is not an economic project. It poses a serious threat and is a security challenge, and must be viewed in terms of security guarantees for Ukraine.”
Zelensky was invited to meet in the White House after Biden’s June 16 meeting with Putin in Geneva, Switzerland.
