RosUkrEnergo: Happily Between a Rock and Hard Place

Via Oil and Glory, some interesting commentary on the role of RosUkrEnergo in the recent dispute between Ukraine and Russia.  Half-owned by Gazprom and two Ukrainian businessmen, RosUkrEnergo owns no gas, or pipelines, yet earns a flat 20% take off the top of all the gas sold by Russia to Ukraine.  As the article notes:

“…Russia has prickly relations with several of its neighbors, but all pale in comparison with its friction with Georgia and Ukraine. Last August, the former resulted in a full-fledged war, and pessimism about the security of the U.S.-backed oil and natural gas corridor connecting the Caspian Sea with the West. Now, the latter — Russia’s long antagonism with Ukraine — is provoking a similar recalibration of energy security, this time about natural gas supplies to Europe.

…The article notes the role of an opaque middleman company called RosUkrEnergo in the deal. We have discussed RosUkrEnergo at O&G; The Wall Street Journal’s Glenn Simpson has done the best ground-breaking work on the company. Half-owned by Gazprom and two Ukrainian businessmen, RosUkrEnergo is the equivalent of a maitre d’ who performs no principal role but controls access to the best tables. RosUkrEnergo owns no gas, or pipelines, yet earns a flat 20% take off the top of all the gas sold by Russia to Ukraine.

RosUkrEnergo takes that gas, and sells it. That amounted to a staggering $4.3 billion in proceeds to RosUkrEnergo in 2007, according to Chow and Elkind. How that money is divided has never been explained.

In a phone conversation, Chow notes that Gazprom and Ukraine at one point were just $15 apart in their negotiations — Russia was demanding $250 per 1,000 cubic meters of natural gas this year, while Ukraine was offering $235. “If that was the only difference, why couldn’t they make a deal?” Chow asks. “I suspect the difference was the role that RosUkrEnergo would play.”

Chow and Elkind call RosUkrEnergo “shady.” “The company’s role is a political bone of contention in that an entity with no assets, no track record, and no transparency was placed at the very center of the Ukrainian gas economy,” they write.”

This entry was posted on Friday, January 9th, 2009 at 9:45 am and is filed under Russia, Ukraine.  You can follow any responses to this entry through the RSS 2.0 feed.  Both comments and pings are currently closed. 

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