INTERVIEW: "The European gas crisis is caused by Gazprom, they don't want to supply gas" – Sergiy Makogon, CEO of GTSOU

Fears of a brutal winter are sending chills through Europe, even more so after Russia stopped gas flows through Nord Stream 1 indefinitely last week citing an alleged oil leak. With Russian gas no longer flowing through Europe’s largest pipeline, gas prices spiked and there’s growing social unrest as millions will struggle to keep warm once temperatures plunge.

However, Sergiy Makogon, CEO of Gas Transmission System Operator of Ukraine (GTSOU), knows that Ukraine could be Europe’s saviour with the ability to fully compensate for NS1’s inaction. But there is a problem – the Russian energy giant Gazprom.

“The European gas crisis is not caused by delivery routes. It is caused by the producer – Gazprom. They don't want to supply gas,” Makogon said in an exclusive interview with bne IntelliNews.

He points to several options as an alternative, including the Yamal-Europe pipeline that runs through Belarus and Poland to Germany and can transport up to 90mn cubic metres per day, as well as Ukraine’s northern route, Sudzha, which has the capacity to transport 244 mcm per day. Together, they are easily capable of making up the 155 mcm that NS1 sends to Europe.

However, despite its vast capacity, Gazprom is only sending 41 mcm per day through Sudzha, even though it is currently paying for the amount of 109.6 mcm. In fact, Makogon believes that Gazprom is making excuses about NS1’s technical problems in order to exert pressure on Europe’s leaders.

“We understand that Russia is putting pressure on Europe with this significant gas price, and we see some social problems in Europe. This is the goal of Putin: to put pressure on political leaders, in order to emit the sanctions and decrease support for Ukraine,” he stated.

According to GTSOU, Gazprom was also dishonest back in May when gas transportation was cut off at the Sokhranivka gas metering station (GMS) and the border compressor station (CS), Novopskov, in Eastern Ukraine. The entry point accounted for a third of Russia’s gas to Europe, reaching 32.6 mcm per day.

Trouble arose when Russian troops occupied Sokhranivka at the start of the full-scale invasion. The GTSOU had installed a fully insulated mould so that the transit pipeline was able to deliver all the gas to Ukrainian-controlled territories without any leaks. However, Makogon received information that Russia was intervening in the operations and had redirected part of the flow to the Russian-controlled self-proclaimed ‘Luhansk People’s Republic.’

“They started to close and open valves. And this behaviour created not only financial risk but also significant risks for the safe operations of the GTS, as we need to ensure proper pressure in the pipeline. It created a significant technological risk for the system,” Makogon explained.

As such, the company had to declare force majeure. Instead, GTSOU asked Gazprom to transfer gas flows to Sudzha free of charge. Despite having transferred the flow to the northern pipeline in October 2020 due to maintenance work, Gazprom claimed it wasn’t technically possible this time, which Makogon believes is not true. Instead, Gazprom closed the valve, halting gas flow through Sokhranivka. In response, GTSOU is in the process of taking Russia to court to claim for the losses caused by Russia’s damage to infrastructure and losses to gas. 

Although Gazprom continues to transfer 41 mcm through Ukraine, Makogon is not certain that Russia won’t drop below this level and send even less gas. He believes Gazprom could create an artificial argument, such as a fabricated technical problem, to present a reason to stop gas flow.

“Gazprom is making decisions not based on some economic interest. It's a fully political decision. So since NS1 was a political decision, the stopping of transit through Ukraine is also a political decision,” he said.

Ultimately, Russia is at war with Ukraine and GTSOU supports the Ukrainian government’s embargo on Russian gas in Europe. However, it is aware that this cannot be done straight away and requires a transition period. During this time, Makogon believes Ukraine can support its European partners as a reliable transit country for gas.

“Our position is that the last cubic metre of gas from Russia to Europe should not flow through Nord Stream 1 but through Ukraine,” he said.