About 100km from Ukraine’s border with the EU, an array of pipes and pumps hints at what stands to become an important part of the bloc’s efforts to secure energy supplies and thwart Russian President Vladimir Putin.
Tucked between farm fields and forests, the Bilche-Volytsko-Uherske storage facility can stockpile more than four times as much natural gas as the largest site in Germany and connects easily to the bloc’s grids, thanks to Ukraine’s decades-long role as a transit route for Russian energy.
Storing vital fuel in a country subjected to missile strikes and attacks on critical energy infrastructure might sound like a crazy idea.
However, it is winning backers as the facilities are far enough from the front line to be deemed safe and some traders reckon it is worth the risk.
In a sign of the concerns, German Minister of Economic Affairs Robert Habeck issued a stark warning over the possibility of halting industrial capacity in the winter without Russian gas flowing through Ukraine, saying that policymakers need to continue to take precautions to secure energy supplies.
“We’re not yet out of the woods,” he said at an economic conference in eastern Germany on Monday. “The favorable situation mustn’t lead to us making the same mistake again of forgetting what the threat is.”
European officials are contemplating whether to support links to Bilche-Volytsko-Uherske and other facilities scattered across Ukraine — home to the continent’s biggest network of underground caverns that can hold gas for when demand and prices spike in the winter. With EU sites already edging close to capacity — currently more than 70 percent full — storing the fuel in Ukraine could prevent a glut in the coming months.
“Ukrainian storage can help to balance supply and demand during the second half of the summer 2023, given their excellent connection to EU gas markets,” German utility RWE AG, which has used Ukraine’s storage in the past, said in a statement to Bloomberg.
To make storing gas in Ukraine viable, prices would need to fall low enough to justify the costs. The EU would also likely need to step in to provide a backstop against potential losses related to the conflict.
The evolving initiative is part of efforts to avoid the panic that led to record prices and state intervention last year. To shield companies and consumers, EU governments rolled out 646 billion euros (US$697 billion) in aid, think tank Bruegel said, and they can ill afford a repeat.
While European energy companies stored gas in Ukraine before Russia’s invasion in February last year, putting supplies in a country involved in combat would normally be unheard of, and the deliberations reflect Europe’s narrow range of options and how the war has reset risks.
Energy has been a weapon in the conflict since the beginning. Last week’s explosion of the Kakhovka dam on the Dnipro River is the latest example. Last year, the Kremlin gradually squeezed gas supplies, creating havoc on Europe’s energy markets. Those concerns remain and Ukraine is offering help.
Storing gas for Europe would not only generate much-needed revenue for the country, it would strengthen ties with the bloc and serve as a snub to Russia after the Kremlin sought to use energy to weaken support for Kyiv.
The country’s gas storage capacity — located in relative safety as much as 2km below ground — totals more than 30 billion cubic meters. Operator Ukrtransgaz is making available one-third of that space — equivalent to about 10 percent of the EU’s fourth-quarter demand last year.
“The Ukrainian market offers storage at a fixed cost rate, which makes gas storage in Ukraine a very attractive and competitive option,” said Marco Saalfrank, the head of continental Europe merchant trading at Switzerland-based Axpo, but adding that the risk needs to be low.
With the insurance industry steering clear of Ukraine, the extent to which traders are willing to stockpile gas in Ukraine depends on pricing and whether the EU is prepared to provide a backstop. Talks are ongoing.
The European Commission — the bloc’s executive arm — is “exploring if and how guarantees issued by public institutions could perhaps support unlocking access to natural gas storages in Ukraine,” commission spokesman Tim McPhie told a briefing with reporters last week.
For its part, Ukrtransgaz is working on implementing service guarantees to reduce war-related risks as it seeks to become “a power bank for Europe,” the company said in an e-mailed response to Bloomberg questions, adding that demand has surpassed its initial expectations.
Time is running short on getting a system in place. Europe’s storage sites are expected to reach capacity limits as soon as early September. Heating demand typically does not kick in until later in the fall, creating risks of oversupply, which could then whipsaw if a cold snap sets in.
Without Russian pipeline deliveries — which have largely ceased — European gas markets are more finely balanced than in the past. That means surges in demand or disruptions to supply can have outsized effects.
The use of Ukraine’s facilities would help avert a crash in prices ahead of the winter, but if the usage is “unexpectedly high,” it also presents downside risks to rates next year, consultants Energy Aspects Ltd said.
Winter contracts are trading at a premium to summer prices, making storage in Ukraine or on tankers at sea an increasingly attractive option.
Swiss trader Axpo stockpiled gas in Ukraine before the war and is open to doing so again, but it is keeping a close eye on developments and government guarantees would be key.
“Since the start of the war, the risks related to energy infrastructure in Ukraine have increased tremendously, as we’ve unfortunately seen with the recent dam explosion,” Saalfrank said.
Chinese Nationalist Party (KMT) caucus whip Fu Kun-chi (傅?萁) has caused havoc with his attempts to overturn the democratic and constitutional order in the legislature. If we look at this devolution from the context of a transition to democracy from authoritarianism in a culturally Chinese sense — that of zhonghua (中華) — then we are playing witness to a servile spirit from a millennia-old form of totalitarianism that is intent on damaging the nation’s hard-won democracy. This servile spirit is ingrained in Chinese culture. About a century ago, Chinese satirist and author Lu Xun (魯迅) saw through the servile nature of
In their New York Times bestseller How Democracies Die, Harvard political scientists Steven Levitsky and Daniel Ziblatt said that democracies today “may die at the hands not of generals but of elected leaders. Many government efforts to subvert democracy are ‘legal,’ in the sense that they are approved by the legislature or accepted by the courts. They may even be portrayed as efforts to improve democracy — making the judiciary more efficient, combating corruption, or cleaning up the electoral process.” Moreover, the two authors observe that those who denounce such legal threats to democracy are often “dismissed as exaggerating or
Monday was the 37th anniversary of former president Chiang Ching-kuo’s (蔣經國) death. Chiang — a son of former president Chiang Kai-shek (蔣介石), who had implemented party-state rule and martial law in Taiwan — has a complicated legacy. Whether one looks at his time in power in a positive or negative light depends very much on who they are, and what their relationship with the Chinese Nationalist Party (KMT) is. Although toward the end of his life Chiang Ching-kuo lifted martial law and steered Taiwan onto the path of democratization, these changes were forced upon him by internal and external pressures,
The Chinese Nationalist Party (KMT) caucus in the Legislative Yuan has made an internal decision to freeze NT$1.8 billion (US$54.7 million) of the indigenous submarine project’s NT$2 billion budget. This means that up to 90 percent of the budget cannot be utilized. It would only be accessible if the legislature agrees to lift the freeze sometime in the future. However, for Taiwan to construct its own submarines, it must rely on foreign support for several key pieces of equipment and technology. These foreign supporters would also be forced to endure significant pressure, infiltration and influence from Beijing. In other words,
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