Oil Gas Network

A new, more Russia friendly government in Ukraine has Kiev trying to woo Moscow back into closer partnership over their shared energy infrastructure, according to TV Novosti which reports that a Ukrainian delegation is in Moscow this week. The report writes that the Ukrainian Fuel and Energy Minister would like to renegotiate a long term contract (10 years!) made last year.

Leaders in Kiev hope they can convince the Kremlin to join a gas consortium, offering foreign investors a significant percentage of gas profits in exchange for significant infrastructure investments. Most likely, the idea is too little, too late as Moscow has already plunged forward with its new plans, the article notes.

But Russia is not eager to spend vast quantities of money on Ukraine’s gas distribution system as it has plans for alternative gas routes, Nord Stream and South Stream, which it is not prepared to give up.

According to TV Novosti, Ukraine estimates it would need $2.5 billion to rebuild its energy infrastructure.

On a related note, extensive analysis on Shadowtraders emphasizes the geopolitical importance of Ukraine to the West and sketches out the connotations of  Viktor Yanukovych’s victory in Ukraine’s presidential elections last month.

A look at the map will indicate just how strategic Ukraine is for both NATO and for Russia. Not only does the country directly border Russia to its east, but it also provides the transit route for most Russian natural gas pipelines to western Europe — some 80% of all Russian gas exports from which the country earns dollars, a vital economic lifeline for Russia.