New Gas Trader To Boost Turkmenistan-Ukraine Transit

On July 29, fully owned subsidiaries of Gazprom and of Austria’s Raiffeisen Bank signed agreements establishing a joint gas-trading company, RosUkrEnergoprom. With Gazprom and Raiffeisen each holding half the shares, RosUkrEnergoprom will act as the operating company for gas exports from Turkmenistan to Ukraine via Russia. The company will be responsible for acquisition, transit, and delivery of gas, as well as maintaining and upgrading the pipeline system.

RosUkrEnergoprom is due to replace EuralTransGas as the operating company for Turkmen gas exports to Ukraine. Widely assumed to be a Gazprom front, EuralTransGas is a trading company registered in Hungary and said to be owned by a few obscure Hungarian and Romanian individuals. EuralTransGas has handled the supply of Turkmen gas to Ukraine since January 2003 and is to continue through December 2004. During 2003 it carried a staggering 35 billion cubic meters of Turkmen gas, and recorded a commercial turnover of approximately $2 billion, with a net $220 million profit from sales to Ukraine.

EuralTransGas had taken over that role from Itera, an equally opaque, Florida-registered trading company created during the 1990s by the then-management of Gazprom. Following the replacement of that management by one linked to President Vladimir Putin, Gazprom systematically squeezed Itera out CIS gas markets, of which Ukraine’s is by far the largest.

Agreements just signed by RosUkrEnergoprom with Gazprom’s trading subsidiary Gazeksport and with NaftoHaz Ukrainy envisage spectacular increases in Turkmen gas deliveries to Ukraine: 44 billion cubic meters in 2005, and 60 billion cubic meters annually starting in 2007. In addition, NaftoHaz Ukrainy and Gazprom are now discussing a pipeline expansion project that would add 19 billion cubic meters to Ukraine’s annual gas transit capacity (Interfax, July 26, 29).