Mr President of the European Council,
Madam President of the European Commission,
As is already common knowledge, Ukrainian President V. Zelensky unilaterally, without any open consultations with the authorities of the European Union or the Member States concerned, announced that after 1 January 2025 Ukraine will not provide any gas transit through its territory towards the Slovak Republic and for other customers in Western Europe.
I stress the unilateral nature of this decision because the European Commission in its letter of December this year addressed, among others, to the Deputy Prime Minister of the Slovak Republic D. Sakova, stated unequivocally that "the conclusion of contracts for the supply or transit of Russian gas is not prohibited under EU law at this stage, as it is not subject to EU sanctions and the import of Russian gas is not currently prohibited by other provisions of EU law." ("...concluding contracts for the supply or transport of Russian gas is not prohibited under EU law at this stage, as it is not covered by EU sanctions, and as the import of Russian gas is currently not forbidden by other provisions of Union law...").
I would particularly like to remind you that other options for gas transit than Russian gas were presented to the Ukrainian partners, but these were also rejected by the Ukrainian President.
Mr Speaker,
Madam President,
I am not only addressing you as the Prime Minister of an EU Member State that will be severely financially damaged by this unilateral decision of the Ukrainian President, especially in light of the necessary ongoing consolidation of public finances that the previous government left us in a disastrous state. I am addressing you, in particular, as Prime Minister of a country that is actively engaged in a vital debate on how to maintain the EU's declining competitiveness in relation to other regions of the world. There is no doubt that the unilateral decision of the Ukrainian President will have a significant negative impact on our common European efforts to keep pace with the rapidly developing countries of the world.
It is not known to me whether the vague approach of the European Commission and the majority of Member States is based on the fact that the economic impact of the interruption of the transit of Russian gas or other gas through Ukraine has not been analysed professionally at all and the whole thing has been assessed only ideologically, or whether such an analysis has been carried out but not discussed openly with the Member States and the impact of the Ukrainian President's decision on the European economy is underestimated.
In any case, I want to present a clear position on behalf of the Slovak side that, especially now, at a time of a complicated economic situation when we have to resort to painful austerity measures, I consider it absolutely necessary that the economic impact of important decisions be analysed and that positions be taken with a thorough knowledge of the matter.
In the absence of convincing objective documents prepared at the level of the European Commission, I asked the Slovak company SPP, a.s., which is not only the dominant gas supplier in Slovakia but also one of the major European gas traders, to provide me with an expert view on the impact of the termination of gas transit via Ukraine on the price of gas in Slovakia and on European markets.
Let me set out in this open letter the most significant conclusions from this analysis.
Although the volume of gas actually transiting through Ukraine is only about 3.5% of gas consumption (EU27 + UK), it is an amount that makes a difference in terms of the overall market situation and results in a conforming situation in terms of demand satisfaction turning into a tense situation. The traders interviewed estimate that the difference between continuing and stopping the transit of Russian gas through Ukraine is at least 10 to 12 EUR/MWh of gas for trades concluded on the key Dutch and German exchange markets. This difference is also reflected in the increase in gas prices from around EUR 35/MWh to the current level of around EUR 45/MWh, which can only be explained by the negative outlook related to the decision of the Ukrainian President.
In practice, with EU/27 gas consumption at around 4 billion MWh (just under 400 billion cubic metres) per year, this means an additional cost of €40-50 billion per year to European households, businesses and public infrastructure on gas prices alone. After taking into account the secondary effects on electricity prices, the total cost to the EU27 is between €60 and €70 billion per year (€15 to €16 billion per year in Germany alone as Europe's largest market). There is also a direct loss of transit charges of around 800 miles. This loss is apparently considered insignificant by the Ukrainian President, given Ukraine's huge revenues from abroad, and at least EUR 400 million for Slovakia. I add that in the case of Slovakia, even the increase in the price of the commodity would be significantly higher than the reported benchmark of the German and Dutch markets. There is also very likely to be no real possibility of exporting gas from Europe to Ukraine and Ukraine will have to rely exclusively on its own production.
The revenues of the Russian Federation from the continuation of gas transit through Ukraine will amount to approximately only EUR 2 billion.
Mr Speaker,
Madam President,
summing up the facts, we come to a conclusion that must be unacceptable to the European Union and its objectives. Unilaterally stopping transit through Ukraine towards Slovakia will deprive European citizens, businesses and infrastructure of tens of billions of euros a year, Ukraine of almost EUR 800 million and the possibility of importing gas from Europe, and Slovakia of more than EUR 400 million a year in transit fees and well over EUR 1 billion in commodity prices. The loss caused to the Russian Federation will only amount to around €2 billion, i.e. only around 3% of all losses caused to the 27 EU Member States. Not to mention the fact that such a small volume of gas is easily placed by the Russian Federation on other markets, which may bring the losses for the Russian Federation close to zero. I do not even want to comment on the impact on EU competitiveness.
To conclude this open letter, I would like to express the opinion that tacit acceptance of the unilateral decision of the Ukrainian President is completely irrational and wrong and will lead to tensions and reciprocal measures. I also express my belief that it is in the interests of all EU citizens that European efforts to support Ukraine should be rational and not in the form of self-destructive and extremely damaging gestures to the EU. For this reason, I would also like to ask you, not only on behalf of the Slovak Republic, but, above all, on behalf of the entire European Union, to pay due attention to this unprecedented situation and to attach urgent importance to it.
Sincerely
Robert Fico
Prime Minister of the Slovak Republic
Facebook R. Fico/ gnews - Roz
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