Tensions between the West and Russia over actions in the Ukraine and what the West regards as the annexation of the Crimea by Russia remain high (the Russian position is that Crimeans expressed their democratic wish to re-join Russia, of course). Russia has vast reserves of natural gas and the EU is a rich, energy hungry market for it, but currently, delivery of the gas involves a transit through Ukrainian territory. Ukraine and Russian gas supplier Gazprom are involved in a dispute with Ukraine which they claim owes $2.5 billion in outstanding debts. Gazprom has threatened to cut off supplies to the Ukraine which would inevitably hit customers in Europe. 15% of Europe’s gas is delivered via the Ukrainian pipeline, but breathing space in the dispute was provided when Ukraine made a partial payment of $786 million. Costs to Ukraine for Russian gas have rocketed from $268 to $485.5 per 1000 cubic metres of gas meaning that the Ukrainians are paying more for the gas than any European nation. Gazprom currently meets 30% of Europe’s gas supply needs.
Russia is keen to get its gas to market and is in the process of constructing a new southern pipeline (financed by Gazprom) through the Balkans which should be able to handle 63 billion cubic metres of gas annually. The EC has asked EU member Bulgaria, to suspend construction amid concerns that the project has breach EU competition rules. The EC is concerned that Bulgaria’s choice of local and Russian bidders for the section of pipeline crossing its territory may have breached EU public procurement rules.
Russia has accuesed the EU of “creeping sanctions” over the affair whilst the Bulgarians have suggested that the project is certain to go ahead and a solution must be found to resolve EC concerns.