When the giants agree, minions must go with it even if it is bitter. Ukraine is the latest minion who got some sweetening while forced to swallow much bitter solution. USA & Germany joined at the hips on the subject of Nord Stream simply did that to Ukraine which has no option other than to get on the board as faithful follower, to avoid being dismissed as geoeconomics basket case.
Broadly, a consensus formed between USA &Germany that lifting of all sanctions on the Nord Stream 2, requires two provisos: one Russia should declare that Nord Stream is purely a commercial deal and should no way be used as geoeconomics tool to bring pressure upon Europe as the major gas supplier. The second proviso relates to give sweeteners as consolation price for Ukraine that fought tooth and nail against Nord Stream from its inception.
For losing the coveted strategic position as the gas energy transmission corridor, that normally ensured, from Ukraine’s point of view, as an insurance policy against any Russian adventurism towards Ukraine, she received the following incentives:
1. Germany undertakes to reimburse the amount of gas transit fee Ukraine loses during the remaining period of Russia – Ukraine agreement that is slated to expire on 2024. This amount is worked out as US$ 1.2 Billion per annum until then. However the ball-parked figure does not include revenue lost vis Turk Stream, which sliced off close upon another US$ Billion, that was previously paid for using Ukraine gas transmission system.
2. A development fund is being established amounting to US$ one billion to be administered by Germany in order to diversify energy sources for Ukraine. As initial seed capital Germany was quickly forthcoming with her contribution of US$ 175 Million. American contribution is expected to be channelled in due course. At present Ukraine consumes 32 billion cubic metre (bcm) per annum gas, out of which Ukraine’s own source is about 20 bcm. The shortfall of 12 bcm is big figure in terms of monetary value and supply sourcing. How can she offset the shortfall is a big question in geoeconomics policy and practices.
3. Big plus point in favour of Ukraine is her network of gas transmission to Europe, though fairly old is in good working condition. Additionally she has humongous capacity of inter-connected gas storage tanks in strategically located areas that could service entire European stretch north to south and east to west. Producing hydrogen gas instead of transiting natural gas from Russia is a viable alternative. Germany is keen to develop this angle as a part of diversification of her own energy supply sources and type of energy consumed. This propitious proposition is not lost on Germany and her neighbours. As an exploratory measure Germany is contributing US$ 70 million right away.
The question remains how Ukraine will take up the sweetening over the deal on Nord Stream that deprives not only a steady income source but the untimely death of Ukraine’s vaulted ambition to remain as energy corridor for Europe?
Cheers!
Muthu
Ashraff Rajulu
Business Strategist
Mobile: + 94 777 265677
E-mail: cosmicgems@gmail.com
Blog: Business Strategist
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