GERMANY NOT SYMPATHETIC TO UKRAINIAN APPEALS ON

C O N F I D E N T I A L BERLIN 000776 DEPT FOR EUR/CE, EUR/UMB, EB/ESC/IEC-GALLOGLY/WRIGHT DOE PLEASE PASS TO LEKIMOFF, CCALIENDO E.O. 12958: DECL: 06/26/2019 TAGS: ENRG EPET ECON PINR PREL UP EU RU GM SUBJECT: GERMANY NOT SYMPATHETIC TO UKRAINIAN APPEALS ON THE RUSSIA/UKRAINE GAS DISPUTE REF: A. KYIV 00578 ¶B. BERLIN 00003 Classified By: ECONCOUNS INGRID KOLLIST for reasons 1.4 (b,d). ¶1. (C) Summary: Recent statements by German government officials handling energy policy indicate that Berlin continues to see Ukraine as the principal problem preventing a quick resolution of the Ukraine/Russia gas dispute. While Germany plans to attend an EU meeting in Brussels during the week of June 29-July 3 to discuss Ukraine's latest appeal for financial support to purchase Russian gas, the German government does not support providing financial assistance to help Ukraine solve "deep problems of its own making." End Summary. Germans Skeptical on New Money For Ukraine -------------- ¶2. (C) In separate meetings on June 23 and 24, Hartmut Schneider, the Deputy Director General of International Energy Policy at the Economics Ministry, and Alexander Schoenfelder, Deputy Director of International Energy Policy at the Foreign Ministry, clarified the current German stance on the Ukraine/Russia energy dispute. They confirmed that Ukraine has approached the EU for funding to purchase Russian natural gas to stock its storage facilities for domestic consumption during the upcoming winter, and that Ukraine has told the EU it does not have funds for this payment, due in July. They further stated that Germany is reluctant to back Kiev,s request, but will meet with international financial institutions (IFI's),gas providers, governments and the European Investment Bank (EIB) during the week of June 29-July 3 in Brussels to discuss the matter. The meeting will not include Russia and Ukraine. Although Germany has not yet received an invitation to the meeting, it expects one momentarily. ¶3. (C) Schneider noted that the IFI's will not provide assistance to Ukraine without strong "political backing8 from European governments. Schoenfelder affirmed that because of the decreased demand and ready availability of energy supplies on the spot market, Europe,s storage facilities are already full and there is little need for supplies from Gazprom to prepare for the coming winter. In his view, this means that Germany has little vested interest in the current Ukraine/Russia dispute, and no real incentive to back Kiev,s aid request. Schoenfelder pointed out that Ukraine will argue that it must cap off its domestic storage facilities to maintain pressure in its pipelines during the peak European demand season next winter. He implied that this argument is not convincing and will not sway reluctant EU donors. Ukraine's Self-Inflicted Wounds -------------- ¶4. (C) Paraphrasing Vaclav Bartuska, Czech Special Envoy for Energy Security, Schneider blamed Ukraine for the dispute ) pointing to its corruption and the lack of transparency. Since "no one can follow what happens to money that enters Ukraine," stated Schneider, the country must "perform and behave," if it seriously expects financial assistance. Schneider pointed out that Ukraine initialed a new gas purchasing agreement with Gazprom that provides Russian gas at only slightly below the world rate, while Ukraine receives a low transit fee. He questioned why Ukraine would initial such an agreement if bribes to key Ukrainian officials were not involved. Schoenfelder pointed out that Ukrainian pipelines are "leaking everywhere" and claimed that there are 130 separate points in the pipeline where gas bound for Europe can be siphoned off. As a result, key Ukrainians are profiting from the dispute and have no wish to see it resolved, he asserted. ¶5. (C) Stating that these are "not official German views," Schneider complained that Ukraine has been provided with "too many carrots" in the form of potential EU and NATO memberships, encouraging Kiev to seek EU subsidies for its domestic energy consumption. Schneider hypothesized that ideally the dispute will not be solved until Ukraine gets out of the transit business and invites an international consortium to take over the pipeline complex. However, he conceded, this will not take place without "strong international pressure." Driven by Domestic Politics -------------- ¶6. (C) Schoenfelder also pointed out that Ukraine,s hands are tied by domestic political considerations. The country is facing a national election next January that could potentially resolve the political dispute that has diminished the government's ability to govern. He claimed that his Ukrainian interlocutors have insisted that Kiev cannot and will not take decisive action to resolve its energy dispute with Russia until after the election, as no political faction wants to look weak by granting the necessary concessions. Germany's Pipeline Policy -------------- ¶7. (C) Schneider and Schoenfelder also confirmed that Germany supports the completion of the Nordstream, Nabucco, Southstream and Yamed II pipelines as a concrete way to diminish the importance of the Ukrainian transit route and help resolve the crisis atmosphere. Schoenfelder pointed out that German studies indicate that Europe will, for the foreseeable future, need to purchase all the gas provided by all pipelines currently proposed. Emphasizing that Germany is "not nave" Schoenfelder noted that Germany has no desire to become "overly dependent" on Russia. He also noted that Eastern European countries are "much tougher" on Russia than Germany is, forcing Berlin to "balance" between Moscow and its opponents. Comment -------------- ¶8. (C) Comment: German government officials are well aware that Berlin has been accused of a pro-Russian bias. Their repeated statements, however, indicate that while Germany entertains no illusions about Moscow's performance, they view many of Ukraine's wounds as self-inflicted. Germany is thus unlikely to back the Ukrainians in next week's EU meeting with the IFI's. End Comment. Koenig