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World NewsNaftogaz accuses Russia of using gas as a geopolitical weapon

Naftogaz accuses Russia of using gas as a geopolitical weapon

Naftogaz CEO Yuriy Vitrenko.

Anatolii Siryk | Ukrinform | Barcroft Media | Getty Images

LONDON — The chief govt of Ukrainian state power big Naftogaz has accused Russia’s Gazprom of using pure gas as a geopolitical weapon, calling on the U.S. and Germany to take motion towards Moscow whereas it awaits regulatory approval for a controversial pipeline undertaking.

It comes shortly after the International Energy Agency, the world’s power watchdog, intervened to name on Russia to ship extra gas to Europe to alleviate the area’s deepening provide crunch.

The IEA’s statement on Tuesday was seen as a uncommon rebuke of the Kremlin and lent additional help to the view that Moscow has performed a position in Europe’s power disaster — alongside market drivers such as extraordinarily sturdy commodity costs and low wind output.

European households face a steep soar in power payments, with nerves rising forward of winter as energy and gas costs soar.

Record costs that basically damage the economic system of Ukraine [and] not simply Ukraine, the entire area principally. If it isn’t an financial battle, what’s that?”

Yuriy Vitrenko

CEO of Naftogaz

Speaking to CNBC via video call, Naftogaz CEO Yuriy Vitrenko said Russia’s state-owned energy giant Gazprom was manipulating the region’s energy crisis to try to strengthen the case for starting flows via Nord Stream 2.

Gazprom did not respond to a CNBC request for comment.

The pipeline is designed to deliver Russian gas directly to Germany via the Baltic Sea, bypassing Ukraine and Poland.

Critics argue the pipeline is not compatible with European climate goals, deepens the region’s dependence on Russian energy exports and will most likely strengthen Russian President Vladimir Putin’s economic and political influence over the region.

The construction of Nord Stream 2 was completed earlier this month. Germany’s energy regulator has since said it now has four months to complete certification of the project after receiving all necessary paperwork for an operating license.

A facility near the starting point of the Nord Stream 2 offshore natural gas pipeline.

Peter Kovalev | TASS | Getty Images

Naftogaz’s Vitrenko said Gazprom was deliberately withholding gas supplies to Europe, blocking access to the gas transmission system of Ukraine from other Russian companies and blocking exports from Central Asia that could go to Ukraine via Russia.

“This is a very clear signal that they’re using gas as a geopolitical weapon in the intervening time,” Vitrenko said.

Kyiv’s relations with Russia plummeted in 2014 after Moscow annexed the Crimea peninsula from Ukraine and supported pro-Russian separatists in Ukraine’s eastern Donbass region. Ukraine says the seven-year conflict has killed more than 14,000 people.

Germany’s warning to Russia

Benchmark European gas prices have skyrocketed more than 250% since January, while benchmark power contracts in France and Germany have both doubled.

EU energy ministers held meetings in Slovenia this week to discuss the bloc’s energy policy.

Outgoing German Chancellor Angela Merkel sought to ease long-running concerns about the Nord Stream 2 pipeline during her final visit to Kyiv before leaving office.

Speaking last month alongside Ukraine President Volodymyr Zelensky, Merkel said sanctions may be imposed against Moscow if gas was being used “as a weapon.”

Analysts have questioned how Germany or Europe would determine that to be the case.

German Chancellor Angela Merkel gives a joint news conference with Ukrainian President following their talks at the Mariinsky palace in Kiev, on August 22, 2021.

SERGEY DOLZHENKO | AFP | Getty Images

When asked whether Naftogaz had faith Germany would take appropriate action if Russia’s Gazprom was deemed to be using gas as a geopolitical weapon, Vitrenko replied: “We already see that Gazprom is using gas as a geopolitical weapon. So, it isn’t in regards to the future, however we’re telling them that Gazprom has been using gas as a geopolitical weapon for years.”

“It is going on in the intervening time … Record costs that basically damage the economic system of Ukraine [and] not simply Ukraine, the entire area principally. If it isn’t an financial battle, what’s that?”

Germany’s ministry for economic affairs and energy declined to comment when contacted by CNBC.

U.S. Senate panel to discuss Nord Stream 2

Naftogaz’s chief executive said he expects President Joe Biden’s administration to immediately reconsider its decision to waive sanctions on Nord Stream 2 AG, the Gazprom-owned, Swiss-registered company working on the Nord Stream 2 pipeline.

A further delay to lift the waiver would make such a decision “increasingly troublesome,” Vitrenko said.

Biden’s administration concluded in May that Nord Stream 2 AG and its CEO engaged in behavior that warranted sanctions. However, Biden waived the sanctions to allow time to work out a deal and continue building ties with Germany.

The U.S. Senate Foreign Relations Committee is expected to discuss the matter at a closed-door hearing next week. It comes amid intensifying pressure from some Congress members to drop the waiver and impose sanctions.

“First, you present you’re compliant and solely then you’re allowed principally to function. That’s the way it works,” Vitrenko said.

“We anticipate the U.S. authorities will rethink their resolution and take away this waiver and can impose sanctions on Nord Stream 2. And then … after they see Gazprom has stopped using gas as a geopolitical weapon, after they see that Gazprom and its subsidiary change one thing in order that they’re now compliant with European guidelines, then these sanctions will probably be eliminated. That’s the logical strategy.”

“When anyone’s in breach, anyone’s using gas as a geopolitical weapon, you sanction this anyone. And after they behave, you take away these sanctions,” Vitrenko stated.

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