www.ndu.edu/inss SF No. 264 1 

On January 7, 2009, the existing energy relationship among Europe, 

Russia, and Ukraine broke down over a natural gas dispute, just as it 

had done 3 years earlier. Amid subzero temperatures in many parts of 

Europe, Russia turned off its gas supply to Ukraine, causing shortages in more 

than 20 European countries. Thousands across the continent were left in the 

dark, and government services were closed.1 While the flow of gas was eventually restored, Russian gas disputes with Ukraine continue, and the prospect of 

another Gazprom shutoff has become an annual event for European consumers. Despite earlier indications that another breakdown in negotiations would 

lead to blackouts in Europe early in 2010, the potential crisis was averted via 

a Russia-Ukraine deal that restructured earlier payment and pricing arrangements.2

 However, it is doubtful that Ukraine can continue timely payments for 

its domestic gas consumption and maintain its own pipeline infrastructure. Fundamental changes to Russia-Ukraine energy transport agreements are coming.

The annual game of gas brinkmanship played by Russia and Ukraine is of 

strategic significance for the United States and its allies for two main reasons. 

First, when talks break down, Europe suffers. If the current situation continues, at best, Europe must live with continuing energy insecurity; at worst, a total breakdown of negotiations between the supplier and transit country could 

leave many European countries without heat or electricity. Equally important, 

however, is that this problem’s resolution will have important implications for 

power politics in the region. Russian Prime Minister Vladimir Putin has argued that Russian power in Eastern Europe depends on its role as Europe’s 

European Energy Security: 

Reducing Volatility of 

Ukraine-Russia Natural 

Gas Pricing Disputes

by Richard B. Andres and Michael Kofman

STRATEGIC FORUM

National Defense University

CENTER FOR STRATEGIC RESEARCH

About the Authors

Richard B. Andres is Professor 

of National Security Strategy at 

the National War College and a 

Senior Fellow and Energy and 

Environmental Security and Policy 

Chair in the Center for Strategic 

Research (CSR), Institute for 

National Strategic Studies, at 

the National Defense University. 

Michael Kofman is a Program 

Manager and Researcher in CSR.

Key Points

◆ As Russia positions itself for a 

long-sought Gazprom takeover 

of Ukrainian infrastructure, the 

European Union must consider a 

serious investment in Ukraine to 

prevent complete Russian control 

over its energy security.

◆ Despite recent agreements between Russia and Ukraine over 

natural gas pricing, the fundamental issues that caused the shutoff 

of gas to Europe in 2009 remain 

largely unresolved, and a future 

shutoff remains a strong possibility.

◆ Proposed alternative pipelines will 

not alter the key role Ukraine plays 

in European access to Russian gas, 

and independent reforms of its energy sector are unlikely to succeed 

without foreign investment.

February 2011
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energy arbiter. Russia is currently attempting to resolve 

the dispute with Ukraine by increasing its control over 

that country’s gas transit infrastructure, a solution that 

would significantly boost Russia’s ability to use gas as 

a political lever against states within the region. The 

United States has an interest in supporting solutions 

that will decrease the vulnerability of its European allies to potential Russian pressure.

This paper diagnoses the long-running problem 

and evaluates the options and opportunities for limiting the impact of future gas pricing disputes on energy 

security in Europe. There are a number of possibilities for alleviating this problem, including building 

additional pipelines to bypass Ukraine, developing an 

international gas consortium between Russia and the 

European Union (EU), and carrying out reforms to 

the Ukrainian energy sector. The parties are actively 

exploring all of these options. Unfortunately, these 

solutions are partial at best and will not resolve the 

broader problem. While there is no single solution 

that will create a secure gas market, the most practical ways to limit the impact of pricing disputes between Russia and Ukraine are to restrict the means by 

which these two actors can pressure each other and to 

increase transparency in the transit process. The best 

way to achieve this outcome is for the EU to increase 

investment in Ukraine’s transit infrastructure.

Nature of the Problem

In Europe, natural gas politics form an enduring 

economic and political challenge. In its current form, 

the most practical ways to limit the 

impact of pricing disputes are to 

restrict the means by which these 

two actors can pressure each other 

and to increase transparency in the 

transit process

the institutional framework that supplies gas to Europe is based upon the stability of regularly renegotiated agreements between gas supplying and gas transit 

countries. This system is crisis prone and vulnerable to 

disruption. While an armed conflict over natural gas 

transit is highly unlikely, recurring gas disruptions in 

recent years and brinkmanship during pricing negotiations have led to significant loss of revenue for Russia 

and considerable hardship in Europe. In the most recent dispute, over the course of a few days, Gazprom 

lost more than $1 billion during the shutdown and 

millions of consumers in European countries were left 

without heat in the middle of winter.3

Europe’s dependence on cooperation between 

Russia and Ukraine represents a serious and growing 

problem. Currently, the EU depends on natural gas for 

over 22 percent of its electricity.4 This figure is deceptively low. In reality, many members, including Bulgaria, Estonia, Finland, Latvia, Lithuania, Romania, and 

Slovakia, are entirely or almost entirely dependent on 

Russian gas for home heating and electricity generation. Other members, such as Greece, the Netherlands, 

and Hungary, import significant amounts as well. Of 

the largest states with diversified energy sources, Germany and Italy are substantially dependent (30–35 percent) on Russian gas imports, and any shortfall would 

have a drastic impact on their economies. The smaller 

members are particularly vulnerable due to lack of storage facilities. Overall, in 2007, the EU imported 40.8 

percent of its gas from Russia,5 80 percent of which was 

carried by Ukrainian pipelines.6

With European demand increasing and European 

supplies dwindling, this dependency will increase further 

over time. It is likely that there will be a significant rise 

in the use of natural gas for electricity, home heating, and 

industry—and this increase will be met by a heightened 

dependency on imports. Eurogas estimates that EU natural gas demand will grow by 14 to 23 percent by 2030; 

with European domestic production in decline, Russia 

will supply the vast majority of this demand via pipelines 

transiting Ukraine.7 These figures include the possibility 
www.ndu.edu/inss SF No. 264 3 

European Gas Imports from Russia by Country as Percentage of 

Total Consumption

European Union (27 countries) % Gas Imported from Russia

Austria 58

Belgium 0

Bulgaria 100

Cyprus 0

Czech Republic 78

Denmark 0

Estonia N/A

Finland 100

France 19

Germany 40

Greece 60

Hungary 71

Ireland 0

Italy 29

Latvia N/A

Lithuania 100

Luxembourg 0

Malta 0

Netherlands 11

Poland 52

Portugal 0

Romania 15

Slovakia 96

Slovenia 49

Spain 0

Sweden 0

United Kingdom 0

Source: BP Global Statistical Review of World Energy, June 2010. Supplemental data from CIA 

World Factbook.

of drastic improvements in energy efficiency and use of 

renewable sources.

The current situation represents a different type of 

problem for each of the three major players. From the perspective of European gas consumers, the central problem is 

that both Russia and Ukraine regularly use the tacit threat 

of cutting off Europe’s gas supply as a bargaining chip 

during gas transit negotiations. The roots of the problem 

lie in a combination of history and geography. During the 

Cold War, the Soviet Union built gas pipelines through 
4 SF No. 264 www.ndu.edu/inss

Ukraine to supply Eastern Europe. In exchange for gas 

transit, Moscow supplied Ukraine with natural gas at a 

substantial discount but exercised control over the terms 

of the exchange. This arrangement persisted beyond the 

end of the Cold War, but with decreasing levels of Russian control until Ukraine’s largely anti-Russian Orange 

Revolution in 2004. Since the election of President Viktor Yushchenko in 2005, Russia and Ukraine have been 

locked in a dispute over terms of transit, and when negotiations break down, Europe loses access to gas.

From the Russian perspective, the economic and 

diplomatic stakes involved in its contract negotiations 

with Ukraine are substantial. On the geostrategic level, 

Russia’s economic history with Eastern Europe and its 

Increase in Gas Use by Sector (Eurogas Estimates)

Eurogas estimates for the long-term outlook of natural gas demand show significant increases 

in the power generation sector. The Base Case Scenario assumes continued development of 

gas infrastructure, with current energy and environmental policies sustained. The Environment Scenario is based on faster economic recovery estimates with greater reliance on natural 

gas rather than nuclear power as a clean source of energy. Eurogas indicates that by 2015, 

additional contracts for gas supplies will be required, with the overwhelming majority of new 

demand to be met by imports from outside the EU zone.

Key: MTOE = million tonnes of oil equivalent; NGV = natural gas vehicle 

Source: Eurogas, “Long Term Outlook for Gas Demand and Supply, 2007–2030,” available at 

<www.eurogas.org/>. Eurogas membership is composed primarily of companies in the European energy and natural gas industries, with some nonprofit organizations.
www.ndu.edu/inss SF No. 264 5 

geographical position as a bridge between Central Asia 

and Europe position it to benefit substantially from its 

gas trade. With a near monopoly on gas transport to 

Europe, Russia buys Central Asian gas at a substantial 

discount and transports it to European markets, where 

it sells the gas to friendly states at or below the price 

it pays and to other states at a considerable markup. 

This monopoly has come under strain in recent years as 

China has increasingly provided an alternative market 

for Central Asian gas, forcing Russia to raise the prices 

it charges Eastern European states, though its overall 

position as the arbiter of Central Asian gas prices remains strong. This position provides it with considerable leverage over gas-dependent former Soviet states 

and a useful tool with which to coerce the governments 

of Western Europe.8 From an economic standpoint, the 

Russian government relies on revenues from Gazprom’s 

exports to Europe for close to 20 percent of its operating budget. Putin has argued that Russia’s major power 

status depends on its role as an energy arbiter. The fact 

that it must depend on Ukraine to transport 80 percent 

of the gas it exports to Europe is a continual source of 

frustration to Russia and a threat to its reputation as a 

major power.

For Ukraine, this contest of wills with Russia is about 

both economic survival and national pride. Ukraine relies on Russia for the bulk of its energy needs. Around 

75 percent of the gas Ukraine uses enters the country 

through Russian pipes, and around half of Ukraine’s total energy consumption comes from natural gas.9

 Most 

Ukrainian homes are heated by natural gas; steel and 

other export industries are almost completely dependent 

on gas. Losing access to this gas would devastate Ukrainian industry and ravage the economy as a whole. Added to this, Ukraine depends on Russian gas transit fees 

and subsidies for around 2 percent of its gross domestic 

product (GDP).10 Further complicating the negotiations 

is the fact that Ukrainian citizens perceive their country’s geostrategic location as Europe’s gas arbiter with 

nationalistic pride and value their ability to use this position to preserve their autonomy from their former Soviet 

rulers. Thus, the country’s leaders find themselves pulled 

in three directions. In the first place, they must ensure 

access to Russian gas. In the second, they must secure the 

best possible transit fees and purchase discounts. Finally, 

they must promote gas policies that appeal to voters’ concerns about growing Russian hegemony.

Ukraine’s situation is made still worse by the dependence of its economy on inexpensive fuel. After half a 

century of extraordinarily cheap gas, Ukraine has become 

one of the most energy-inefficient nations in the world. 

Any move to raise gas prices to market levels would 

likely make Ukrainian industry uncompetitive in global 

markets. Coupled with voter expectations of continued 

low heating costs, raising gas prices has, until recently, 

been politically unacceptable. As a result, Ukraine’s gas 

company, Naftogaz, sells gas to Ukrainian consumers at 

rates lower than the price at which it buys the gas from 

Russia’s Gazprom and operates at a loss. The company is 

continually on the verge of bankruptcy, forced to depend 

on state assistance to remain viable.11 Problems with this 

highly subsidized system are exacerbated by decaying 

transit infrastructure, endemic corruption, and a general 

lack of transparency. While this system of subsidies is not 

economically rational, changing it would involve significant political and economic dislocations that would be 

damaging to existing political power brokers.

Given this background, a destructive bargaining 

game over the price of gas and the cost of transit has 

evolved between Russia and Ukraine during the past 

two decades. Russia not only attempts to transport gas 

through Ukrainian infrastructure to Europe at the lowest 

the fact that it must depend on 

Ukraine to transport 80 percent 

of the gas it exports to Europe is a 

continual source of frustration to 

Russia and a threat to its reputation 

as a major power
6 SF No. 264 www.ndu.edu/inss

rates possible but also uses threats of higher gas prices to 

influence Ukrainian politics. Ukraine attempts to extract 

the highest transit fees possible from Russia using open 

negotiations. It also uses the opacity and decrepitude of 

its transit infrastructure to siphon off Russian gas intended for Europe, with some level of plausible deniability for government leaders, and uses its economic problems to excuse late or non-payment of billions of dollars 

of gas debts to Gazprom.

In this bargaining arrangement, both Russia and 

Ukraine hold significant economic weapons but cannot use them without suffering themselves. If Ukraine’s 

failure to pay its gas debts becomes too costly or its diplomacy becomes too Western, Russia has the option of 

stopping sales of gas to Ukraine, as it did in 2006 and 

2009, with devastating effects on Ukraine’s economy. 

However, if Russia takes this action, Ukraine can respond 

by cutting off the flow of Russian gas to Europe, again 

as happened in 2006 and 2009, an action that hurts Russia’s government economically, humiliates it politically, 

and damages its reputation in Europe as a stable source 

of supply. Ukraine can take such action at will due to 

the lack of transparency in the system, citing the absence 

of technical gas—used to keep lines pressurized—in the 

pipeline or blaming Russia entirely for shutting off the 

gas. Conversely, given the opacity in its own system, Russia can make similar accusations against Ukraine with 

little chance of being caught in a lie.

The history of the gas dispute between Russia and 

Ukraine has its roots in the end of the Cold War. In the 

1990s, after Ukraine gained its independence from Russia, the two countries had difficulty agreeing on terms of 

transit. On several occasions, Russia resorted to shutting 

off the flow of gas to Ukraine when it failed to pay acthe history of the gas dispute 

between Russia and Ukraine has its 

roots in the end of the Cold War

crued gas debts. (Russia alleged that Ukraine siphoned 

off Russian gas transiting to Europe as the reason for 

these shutoffs.) After several rejected formulations for 

settling the debt, Russia began to pay Ukraine for the 

cost of transit in gas, effectively linking Ukraine’s own 

dependency on gas imports to Russia’s payment for transit through its infrastructure. Nevertheless, issues surrounding previous debt to Gazprom and its actual value 

remained unresolved and were not settled until 2001.

After the 2001 agreement, the relationship between Russia and Ukraine remained rocky but quiet 

until Ukraine’s Orange Revolution in 2004. Almost 

immediately after the bitterly contested election of proWestern Yushchenko, Russia announced that it would 

reduce its gas subsidy to Ukraine, taking the position 

that gas subsidies were intended as a gift to a friendly 

government. Ukraine agreed to Russia’s terms, but several months later almost 8 billion cubic meters (bcm) of 

gas that Russia had deposited in Ukrainian reservoirs 

disappeared. Due to the opacity and general disrepair 

of its infrastructure, Ukraine was able to declare with 

some credibility that it did not know what had happened to the gas.12 Negotiations continued throughout 

2005 but broke down when, on January 1, 2006, Russia 

cut off its supply of gas to Ukraine, which subsequently 

reduced the flow to its European customers. After 3 

days of frantic negotiations, Russia and Ukraine agreed 

to new terms of transit.

For the next 18 months, Russia and Ukraine continued to renegotiate their transit arrangements. In early 

March 2008, Russia cut gas shipments by 50 percent for 

2 days in retaliation for unpaid debt. Throughout the 

year, relations deteriorated. On January 1, 2009, Russia 

cut off its supply of gas to Ukraine. Over the next few 

days, Ukraine began to pass these reductions on to European consumers. On January 7, Russia stopped the flow 

of all gas to both Ukrainian and European customers. 

After 13 more days of heated negotiations, the countries 

arrived at a settlement and gas flow resumed. Customers across Europe had been left without heat and power, 

and the loss in revenue to both Russia and Ukraine was 
www.ndu.edu/inss SF No. 264 7 

significant. The shutoff caused Europe to lose much of 

its confidence in Russia’s and Ukraine’s ability to reach 

agreements that ensure the uninterrupted supply of gas. 

So far, however, these concerns do not appear to have 

had much effect on Europe’s dependence on Russian gas.

While the primary cause of disputes in the 1990s 

was Ukraine’s failure to pay for gas deliveries, the more 

serious breakdowns in negotiations following 2005 were 

mainly based in the political tension between Ukraine’s 

new Western-leaning government and Russia’s attempts 

to use gas as leverage to check Yushchenko’s policies. 

Russia may not have believed it would get the higher 

prices it was asking of its former satellite but intended 

to use the ploy to gain leverage and get the Ukrainian 

government to make concessions in other areas. As Kyiv 

made clear its desire for North Atlantic Treaty Organization membership and increased ties with the West, 

Russia sought to raise the costs and hardships associated 

with such policies.13 The continued increase in the cost 

of Russian gas to Ukraine was not without an economic 

basis, given that Gazprom found itself paying higher 

rates to Central Asian supplier countries, but it was also a 

means to exert control over Kyiv. The gas pricing disputes 

were a result of Ukraine being unable to pay the markedly increased costs and employing its own leverage as a 

transit country to Europe in price negotiations.

The nature of Russia’s and Ukraine’s energy industry has been a major part of the problem. Gazprom and 

Naftogaz remain state-controlled and -owned entities, 

vital to their respective countries. Gazprom energy exports are a key source of revenue for the Russian government, as is Naftogaz’s energy transit infrastructure 

for Ukraine. The Russian government owns 50 percent 

of Gazprom, a controlling share, while Naftogaz is 100 

percent state-owned. Its business negotiations are largely 

conducted by the national political leadership. Hence, it 

is subject to other political considerations and the context of relations between the two countries. Negotiations 

have always dealt with the question of gas pricing as part 

of a larger host of issues. The record shows a history of 

unstable deals that bundle Ukraine’s gas import prices 

with various debts, tariffs, and transit prices. Ukraine has 

perpetually locked itself into unaffordable prices, creating debt, late payments, and adding to obligations in dispute between the two countries. It also consistently locks 

in import volumes well above domestic consumption requirements, avoiding reforms to its inefficient industry, 

and at times incurring penalties for not purchasing the 

contracted quota of gas. 

Since the February 2010 election of Ukrainian 

President Victor Yanukovich, a distinctly more Russia-friendly leader, the two countries have signed a 

new pricing agreement. Ukraine will effectively pay 

30 percent less than the originally negotiated price 

for 2010 (of $300 per 1,000 cm), which has been 

touted as producing over $40 billion in savings over 

the 10-year term of the agreement. Although advertised as a Russian return to the policy of gas subsidies for politically friendly states, this agreement is 

unlikely to prove more stable than previous arrangements. The deal is not particularly generous. Early 

in 2010, Gazprom renegotiated its major gas supply 

contracts with other European gas consumers because 

of falling market prices.14 The lower rates Ukraine received simply brought the contract in line with rates 

being paid by EU customers. Beyond this, it is doubtful Ukraine could have afforded to pay the original 

higher gas prices. 

The energy deal was not without a political context. 

Many observers commented that this deal was messily 

coupled with Ukraine’s 25-year extension for Russian 

Black Sea Fleet basing rights in the Crimea, repeating 

the history of mixing gas pricing with political issues 

in Russia-Ukraine relations. As part of the deal, 

Ukraine also promised to import 40 bcm per year, well 

above domestic demand in 2008 and 2009.15 In the fall 

of 2010, the agreement began to unravel ahead of the 

approaching winter, with the Ukrainian government 

claiming that the pricing agreement was unfair. 

Legacy issues also arose with a ruling that Naftogaz 

unlawfully took 11 bcm during the 2009 gas crisis from 

RosUkrEnergo (RUE), a gas intermediary company 
8 SF No. 264 www.ndu.edu/inss

with 50 percent Gazprom ownership.16 Following 

an arbitration court ruling, Naftogaz has reached a 

settlement with RUE, requiring it to return 12.1 bcm 

in confiscated gas and penalties. In exchange, RUE will 

repay a debt of $1.7 billion to Naftogaz and $810 million 

to Gazprom. The settlement results in a considerable 

cash gain for Gazprom and RUE while Naftogaz loses 

roughly $1.2 billion in gas that it must now return. In 

the ensuing controversy, the former prime minister, Yulia 

Tymoshenko, alleged that Ukraine had never intended 

to defend its case in court and the agreement was simply 

a back door deal profiting Gazprom and the tycoons 

behind RUE. The 2010 agreement gave Ukraine a 

temporary reprieve from addressing its domestic energy 

inefficiency, reforms to Naftogaz, and budget austerity 

measures to meet International Monetary Fund (IMF) 

loan conditions. This is yet another bad deal in a series of 

poorly negotiated agreements, and it is beginning to fall 

apart. More gas pricing disputes are almost certainly on 

the horizon.

Potential Solutions

The situation in Ukraine is stable for the moment, 

largely due to IMF loans compensating for a considerable budget deficit, but the situation does not bode well 

for the country’s future. Recent agreements with Russia 

appear to be only a temporary reprieve. Following a 15.4 

percent GDP contraction in 2009, and with only a modest recovery in 2010, Ukraine will not be able to meet its 

obligations. It is doubtful that it can stick to IMF loan 

conditions without another round of negotiations on 

gas prices. A number of solutions (analyzed below) have 

the current global financial crisis 

has decreased Europe’s demand 

for gas and created a glut that is 

reducing investor confidence in 

new pipelines

been proposed for addressing the long-term problem of 

gas brinkmanship between Russia and Ukraine.

Development of Alternate Pipelines (Nord and South 

Stream). The most direct way to solve the problem between 

Russia and Ukraine is to diversify supply routes. If Ukraine 

lost its monopoly on transit, it would lose at least some of 

its ability to hold Russian gas hostage. Currently, Gazprom 

is diligently working to bring this about by building the 

Nord Stream and continuing to develop plans for the South 

Stream pipeline in order to circumvent Ukraine.

Although the new pipelines should prove helpful for 

practical reasons, the proposed Russian lines will not go 

far toward solving Europe’s gas transit problem. The proposed Nord and South Stream pipeline projects together 

are expected to bring between 85 and 120 bcm of natural gas from Russia and the Caspian Sea to Europe.17 Of 

these, the Nord Stream pipeline has the most potential 

and is the only one currently on schedule for completion. Heavily backed by Germany, the project has had no 

trouble obtaining financing. This route would link Russia and its largest gas customer, Germany, via the Baltic 

Sea. However, there are two problems. First, the current 

global financial crisis has decreased Europe’s demand for 

gas and created a glut that, at least in the short term, is 

reducing investor confidence in new pipelines.18 This glut 

has caused Russia to delay development of the Shtokman 

field that will supply Nord Stream; it remains to be seen 

whether Nord Stream will still be developed at the proposed capacity.19 Second, and far more important, longterm European demand for gas is projected to increase 

faster than the pipeline will be able to supply it, even if 

the pipeline is built to planned capacity and Russia is able 

to develop Shtokman. Most analyses show European annual gas demand increasing by 200 bcm by 2025.20 Nord 

Stream is only planned to provide Europe with 55 bcm 

annually.21 Hence, not only will it fail to replace Ukrainian 

routes, it will only be able to relieve around a quarter of the 

expected increase in Europe’s demand for gas.22

Russia’s second pipeline planned to circumvent 

Ukraine, South Stream, is a joint project between Gazprom and the Italian company ENI. Once completed, it 
www.ndu.edu/inss SF No. 264 9 

will carry Russian and Central Asian gas from the Black 

Sea coast to Bulgaria and then bifurcate into a southern 

branch to Greece and Italy and a northern branch into 

Serbia, Hungary, and Austria. South Stream is projected 

to be completed in 2015, and Gazprom continues to 

claim that it will finance the project.23 Its chief competitor, the proposed Nabucco pipeline, is the least attractive 

of the projects, costing more than the proposed Nord 

Stream but carrying only half as much gas (31 bcm).24

Unfortunately, South Stream is plagued by logistical 

and feasibility problems and remains entirely on paper. 

While building pipelines in the Black Sea is easier than 

in the Baltic, South Stream requires considerable technological expertise, most of which is being supplied by 

ENI. Due in part to the current gas glut, ENI’s commitment to South Stream is shaky. Further complicating 

matters, in order to build the pipeline, agreements between Russia, the EU, and Turkey are required as South 

Stream’s current route traverses Turkey’s maritime exclusive economic zone.25 So far, negotiations among Russia, 

ENI, and the relatively Russia-friendly governments in 

Bulgaria, Serbia, and Turkey are moving ahead, but work 

remains to be done before the project can begin.26 Even 

if South Stream does eventually come online, it will only 

relieve a portion of the future increase in European demand. The proposed Nabucco pipeline promises to deliver even less gas than South Stream and faces similar 

feasibility problems.

Since the opening of a direct pipeline from Turkmenistan to China in 2009, which now carries shipments of gas from Uzbekistan as well, it is doubtful 

that Russia can actually secure the gas from Central 

Asia to fill all of these pipeline projects. When Russia lowered its purchase requirements, more Turkmen 

gas became available for export to China. While this 

does not compete with Russia’s markets in Europe, 

it remains to be seen how much Turkmen gas will be 

available for Russia when European demand returns 

and steadily increases. Both Russia and Turkmenistan 

drastically decreased production in 2009 while witnessing an increase in proven reserves, but growing demand 

from China may force Russia to secure contracts with 

other suppliers, like Azerbaijan, to fill new pipelines. If 

either South Stream or Nabucco is developed, it will be 

some time before it becomes a viable supplement to the 

Ukrainian pipeline network. Currently, South Stream is 

in search of another partner company as it continues to 

work on agreements and study the feasibility of routes 

through Europe. Meanwhile, Nabucco has delayed the 

beginning of construction until 2012, having not yet secured the gas it intends to transport and supply, some of 

which it hopes will come from Iraq. Both projects face 

hurdles, ranging from the availability of supply to technical and legal issues. It is likely they will continue to 

face delays, especially given the current lack of demand, 

and even when completed will only provide alternate 

routes for a portion of future increases in gas demand.

Establishing a Consortium. A second potential solution to the Russia-Ukraine transit problems involves 

creating a transit consortium that includes Europe, Russia, and Ukraine. Proponents of this approach argue 

that such a mechanism could provide the balance both 

Russia and Ukraine seek in the gas transit equation. A 

European presence could grant Ukraine a Western ally 

and Russia a partner focused on long-term energy security for European residents. Various operational models 

are possible, including the consortium leasing or even 

purchasing partial ownership of Ukrainian gas pipelines. 

Selling part of the ownership rights to Ukraine’s gas transit system to a consortium could raise significant capital 

for the struggling Naftogaz. Alternatively, a leasing option 

would allow Ukraine to retain ownership while granting 

the consortium operational control over the gas pipelines 

for a contracted amount of time. The EU would also benefit from taking an active role in the transit of gas from its 

the EU would benefit from taking an 

active role in the transit of gas from 

its supplier
10 SF No. 264 www.ndu.edu/inss

supplier and become an effective mediator in any future 

disputes through its material stake.

In theory, an international consortium could go 

some way toward solving the problem of volatility in gas 

pricing disputes. From the EU perspective, it would allow Western players to ameliorate Russian leverage, provide greater protection to Ukraine, and enable greater 

transparency and accountability in the entire system. 

Unfortunately, the record of earlier proposals for such 

a solution suggests there is little impetus for Russia to 

join a consortium unless it gains the dominant interest.27

Previous Russian offers for a consortium during the 

winter 2009 gas crisis included France’s Gaz de France 

and Germany’s E.On Ruhrgas (Nord Stream pipeline 

partner), but the dominant investment role was given to 

Gazprom. Thus, the Russian conception of such a venture is to include minority parties from Europe that are 

likely to defer to Gazprom, allowing it to slowly muscle 

out Ukraine’s bankrupt Naftogaz. Last spring, Vladimir 

Putin announced his desire to see Gazprom merge with 

Naftogaz via an asset swap, openly stating Russia’s desire 

to take over the company. In this conception, the EU 

would join the consortium after Gazprom had obtained 

a controlling share of Naftogaz. Russia has demonstrated 

no interest in dealing with the EU as a collective organization but rather focuses on key European countries and 

industry partners. Having already developed close ties 

with them, Russia would seek their inclusion in a consortium with the expectation that it could then leverage 

mutual interests in other ventures to gain their deference 

on Ukraine.

Moreover, a real three-way partnership involving 

Europe would require transparency and accountability. 

The history of Russia-Ukraine business cooperation in 

the energy sector is full of shadowy intermediaries, secret 

investors, and opaque dealings on both sides of the border. It is unlikely that Russia would welcome a partner 

that attempted to shed light on these relationships or do 

away with corrupt business practices. Consequently, the 

only arrangement Russia would likely agree to would be 

one that did not give the EU added influence over its 

own energy security and that provided Russia with control over Ukraine’s transit network and a stronger monopoly over the supply of gas to Europe. The closed-door 

deal between Russia and Ukraine reducing gas prices for 

2010 is yet another example of how Moscow prefers to 

conduct business.

Nevertheless, with the recent election of a more 

Russia-friendly Ukrainian president, the possibility of a 

Russia-dominated consortium is becoming increasingly 

probable. Yanukovich has announced that he will seek to 

form a consortium with Russia and the EU, something 

his predecessors consistently ruled out. While the devil is 

likely to be in the details, Ukraine appears to be positioning itself to trade some ownership rights over pipelines for 

lower gas import prices. It has already exchanged Black 

Sea Fleet basing rights for a purported reduction in gas 

prices. The April 2010 agreement is a stopgap measure, 

based more in politics than economics. It allows Russia 

to show its good will toward Yanukovich and Ukraine 

while maintaining market gas prices and slowly pushing 

Ukraine toward concessions on infrastructure ownership. 

Russia has waited many years for this opportunity and 

is unlikely to settle for anything short of partial ownership of Ukrainian infrastructure and the ability to determine its European partners. Yanukovich will also have to 

overcome domestic hurdles to such a deal. The spectacle 

witnessed in Ukraine’s Rada during debate on the recent 

gas agreement is a harbinger of things to come. Passing 

a law that cedes pipeline ownership to Gazprom will be 

both difficult and unpopular. If the current regime hopes 

to construct any deal on a consortium in the near future, 

it will require European participation as domestic political cover for concessions made to Russia. Yanukovich has 

Ukraine’s industrial sector has 

become the least energy efficient 

in Europe and one of the most 

inefficient in the world
www.ndu.edu/inss SF No. 264 11 

made clear his intention to make the EU a participant 

in any consortium discussions. If the Russian conception 

of EU participation wins out, giving itself the dominant 

and controlling stake, it will mean a Russian takeover of 

Ukraine’s energy infrastructure.

Reforming Ukraine’s Energy Sector. A third potential 

solution involves reforming Ukraine’s energy sector. The 

country’s infrastructure is a product of its Soviet inheritance, largely state-controlled, inefficient, and corrupt, 

with minimum transparency into operations. It does not 

operate at market rates due to heavy government subsidization of residential and commercial consumption. 

Over time, Ukraine’s industrial sector has become the 

least energy efficient in Europe and one of the most inefficient in the world.28

Although the government has allowed domestic energy prices to increase since the end of the Cold 

War, Ukraine’s politicians have not been willing to push 

prices up anywhere close to market rates. Such policies 

would force the country to become more efficient, but 

this efficiency would come at the price of considerable 

hardship to its citizens. As a state-controlled enterprise, 

Naftogaz continues to rely on cash infusions and state 

loans, which it had little trouble obtaining in the past, 

given that many of the company’s shareholders were also 

members of the government.29 Government support to 

Naftogaz amounted to 3 percent of GDP in 2009.30 The 

current economic crisis has created incentives for reform, 

and the government announced that it will only pay up 

to 10 percent of fuel imports from the state budget, leaving Naftogaz on its own to find a way to cover the remaining import cost.31 Domestic utility rates are set to 

gradually increase by 50 percent, which the government 

has blamed entirely on externally imposed conditions. 

Ukraine’s political leadership has yet to claim ownership 

of any of these austerity measures, and it remains to be 

seen whether they will last.

The privatization and unbundling of Naftogaz is a 

long-overdue process that Ukraine is now forced to implement. Recently, Ukraine signed a gas market law and 

acceded to the European energy community, which will 

force it to unbundle the resource extraction and transit 

components of Naftogaz and subsequently make them 

publicly traded enterprises. It has also joined the Eurogas 

organization of European energy companies as an associate member. In effect, Ukraine’s government is attempting to implement changes to its domestic energy sector 

and Naftogaz by having them imposed from the outside. 

Unfortunately, there is little public awareness, understanding, or support for any of these measures. With strong domestic interests opposed to reform, it remains to be seen 

whether any of these changes will be implemented. 

The involvement of vested political interests will 

make privatization opaque and prone to becoming a 

giveaway of state assets at advantageous prices to various oligarchs. It could also create new shadowy intermediaries and additional players in the Ukrainian gas 

sector, akin to the former middleman RosUkrEnergo, 

with unknown shareholders and sources of funding. 

Undoubtedly, Gazprom would attempt to leverage its 

influence in the Ukrainian government and obtain as 

much infrastructure as possible via local proxies in such 

a process. Although this could make Gazprom acquisition of Naftogaz difficult via merger, it could also 

yield similar control. European investors will be skittish about investing in a public company that loses $1 

billion annually and has yet to overcome legacy issues 

ranging from corruption to asset deterioration. Gazprom, however, will not be.

Foreign Investment. Under previous administrations, due in large part to fears of Russian influence, 

European investors will be skittish 

about investing in a public company 

that loses $1 billion annually and 

has yet to overcome legacy issues 

ranging from corruption to 

asset deterioration
12 SF No. 264 www.ndu.edu/inss

Ukraine has demonstrated little interest in allowing foreign investment and control over its gas infrastructure 

and even passed laws barring foreign ownership of energy infrastructure.32 The EU has long commented on 

the problems in its own energy security and Ukraine’s 

infrastructure but has only recently become an active 

participant in the discussion on Ukraine’s future after 

years of avoiding the issue. While Ukraine has been unwilling to open itself to Russian control due to fears that 

this will eventually lead to a de facto loss of sovereignty, it 

may find EU investment more acceptable. The country’s 

past reluctance to allow foreign control of energy infrastructure is probably untenable given its current economic trajectory. Yanukovich’s new policy toward Russia 

demonstrates recognition of this fact. Ukraine will be 

unable to sustain the existing gas sector as a wholly stateowned enterprise even with continued borrowing from 

the IMF and prospective borrowing from Russia or other 

countries. At best, these loans are a short-term solution 

to the government’s budget deficit, which equaled 6 percent of GDP in 2009. Its recent agreements obligate it to 

privatize Naftogaz.

Ukraine has few alternatives. It is doubtful that the 

government can sustain a policy of reliance on IMF 

loans to compensate for its budget deficit and continued subsidization of Naftogaz. The existing requirement 

for external loans to pay for domestic gas consumption 

and maintenance of its energy infrastructure will only 

grow in 2011. Even following the recent renegotiation 

of gas prices, Ukraine’s total payment for gas imports 

from Russia is still considerably increased from 2008 and 

the price is higher than what Western Europe pays today, further stressing its unsustainable economic policy.33

Yanukovich’s deal with Russia is beyond Ukraine’s means 

and is likely a prelude to a future round of more serious 

concessions. It remains to be seen if Ukraine will stick to 

gradual domestic gas price increases that may or may not 

make Naftogaz economically viable.

Opening Ukraine to foreign investment with the 

intent of a partnership with the EU would represent a 

major step toward resolving the volatility of gas disputes 

and long-term issues in Ukrainian energy infrastructure. 

With EU investment and partial ownership of the infrastructure, Ukraine would gain an important partner, 

one likely to introduce both capital and greater transparency into its energy sector—something its government 

is unable to do. Early steps have already been taken in 

this direction, particularly the joint declaration from the 

March 2009 International Investment Conference on 

the Modernization of Ukraine’s Gas Transit System. The 

conference demonstrated the EU’s readiness to invest 

in a modernization and reform program for Ukraine’s 

energy sector as part of a broader EU-Ukraine association framework, and its willingness to commit financial resources to help maintain Ukraine’s infrastructure. 

This proposed program includes conditions focusing on 

transparency, accountability, third-party access to the 

system, and Ukraine’s assurance it would develop a viable gas reform plan.34 The 2009 conference was a clear 

step toward increasing the EU’s role in the Ukrainian energy sector and demonstrating its willingness to shoulder 

more responsibility.

An EU stake with partial ownership, should it materialize, will limit the possibility that a pricing dispute 

could lead to an energy crisis in Europe. EU pipeline 

managers would be unlikely to divert European gas for 

Ukrainian use in the event that such a dispute reaches 

the point of supply cutoffs. Russia has invited EU mediation in the past, and more robust foreign ownership 

would reduce Ukraine’s ability to cut gas supplies off 

from its customers. Partial European ownership would 

also help to moderate Russia’s ability to use gas prices as 

a tool to influence Ukraine politically, since such action 

EU pipeline managers would be 

unlikely to divert European gas for 

Ukrainian use in the event that a 

dispute reaches the point of 

supply cutoffs 
www.ndu.edu/inss SF No. 264 13 

would force it to negotiate with EU companies. It would 

introduce transparency into gas transit and supply across 

Ukraine and limit the options for either country to use 

technical issues as a negotiating tactic.

EU investment could also modernize the pipeline 

infrastructure. Although it would likely lead to higher 

prices for Ukrainian domestic consumption, those increases would provide incentive for efficiency reform 

across the country’s industries. While the EU has 

stepped in with $1.7 billion in loans in exchange for reforms to Ukraine’s energy sector, this is woefully short of 

what Ukraine needs. The loans were intended in part to 

help Naftogaz settle its debt to Gazprom. The country is 

in dire need of investment, and its own optimistic figures 

show a minimum of $3 billion needed for infrastructure 

upgrades and maintenance. 

Russian investment has a number of problems. 

Since Gazprom is 50 percent state owned, investment 

would not come without significant Russian government control. Given the long history of the Russian 

government mixing political and geostrategic concerns 

into Gazprom energy dealings, any significant investment would come with strings attached. The recent 

agreement is another indicator that Russia cannot separate Gazprom’s energy dealings from other state interests. It also does not offer the same benefits because 

Gazprom suffers from many of the same problems as 

Naftogaz. It is grossly underinvested in infrastructure 

modernization and development of gas supplies while 

chained to a gas subsidy scheme in Russia that prevents 

it from selling gas domestically at market rates. These 

dynamics are likely to prevent Gazprom from being in a 

position to invest in modernizing Ukraine’s infrastructure compared to a consortium of EU energy companies. It is more likely to see Ukraine’s domestic energy 

market and infrastructure as a source of revenue rather 

than a place to invest capital. 

If Gazprom did partner with Ukraine, it would 

likely attempt to capitalize on its increased market access and leverage in order to compensate for its own 

problems rather than introducing reforms and modernizing Ukraine’s gas sector. Conversely, an EU investment 

would bring both modernization and transparency into 

European gas transit. Recriminations during the 2009 

crisis demonstrated the effects of the absence of outside 

visibility into gas transit between Russia and Ukraine. 

This lack of transparency allowed Ukraine and Russia to 

continually employ brinkmanship in negotiations while 

blaming each other for the gas cutoff to Europe. Better visibility could substantially reduce the chances of a 

future cutoff. 

Conclusion

The foundations for an energy security framework 

that ensures stability of supply to Europe will not be found 

in one solution. All of the options discussed here are being 

considered or implemented to various degrees. Alternative 

pipelines, if and when they are actually built, will reduce 

some effects of European gas demand growth on Ukrainian transit infrastructure, but they will not eliminate its 

importance in fulfilling European requirements for gas. 

Nor can Europe and Russia expect Ukraine to resolve its 

own problems. It lacks the money to modernize its infrastructure and is politically unable to privatize or institute 

significant reforms to its energy sector.

Ukraine is in dire need of funds and must find a 

patron soon in either the EU or Russia. Failure to do 

anything will leave Ukraine on a collision course with 

Russia, the result of which could be another winter of 

interrupted gas supplies to Europe. Unless transparency increases significantly, both countries maintain the 

option of cutting gas supplies to Europe in a crisis and 

lack of transparency allowed 

Ukraine and Russia to employ 

brinkmanship in negotiations while 

blaming each other for the gas 

cutoff to Europe
14 SF No. 264 www.ndu.edu/inss

blaming the other party for the shutoff. Ukraine’s success in renegotiating gas prices this year falls far short of 

solving its long-term fiscal problems and will not satisfy 

Russia’s desire to control Naftogaz. Unless it chooses to 

undertake a significant and active investment in Ukraine, 

the EU will continue to be a helpless consumer, trapped 

by the negotiations between Russia and Ukraine.

EU action has been relatively conservative. Thus 

far, only Germany appears to recognize the need for 

more serious and active involvement. The EU will need 

to present a more significant foreign investment offer 

to Ukraine or seek to establish a truly international 

consortium that includes European companies as equal 

shareholders along with Russia. Without greater EU 

investment, Ukraine is likely to cede investment and 

ownership rights over its pipeline network to Russia, 

with the outcome disadvantageous to itself and the 

rest of Europe. If this should happen, Russia will acquire greater influence on the Ukrainian political system by increasing its authority over domestic energy 

prices, thereby controlling a key sector of the economy 

and consumer spending. Gazprom is seeking the potentially lucrative Ukrainian domestic gas market for 

business reasons; the Russian government is doing so 

for the power it would gain from controlling energy 

prices in Ukraine. Putin’s announcement in April was a 

clear first step toward Gazprom’s takeover of Naftogaz. 

Such an outcome would significantly reduce Ukrainian 

sovereignty, and Moscow would be quick to translate 

its control of energy supply and transit into influence 

over or pressure on EU member states. This is not in 

the interest of either the European Union or the United 

States. Moreover, the disproportionate dependence of 

Eastern European countries on Russian gas could give 

Moscow the ability to exacerbate or manipulate tensions between Western and Eastern EU members.

The dire state of the Ukrainian economy and the 

recent election of a Russia-friendly government should 

provide the EU with greater impetus to act. Discussions in 2010 between Russia and Ukraine on a possible Gazprom takeover mean that time is a factor. EU 

investment to date and commitment to modernizing 

Ukraine’s infrastructure are not proportional to the 

challenge the country faces. The EU should not look 

at Ukraine as a business opportunity alone, particularly 

in light of currently lagging gas demand, but should 

examine the long-term future of European energy security and the key role Ukraine will continue to play 

in it. Partnership with the EU is not a silver bullet for 

the troubled Ukrainian energy sector, but it is certain 

to reduce the volatility of future pricing disputes and is 

perhaps the only solution that does not leave Ukraine’s 

fate entirely in Russian hands.

Notes

1 European Commission, “Gas Impasse: Russia and Ukraine 

Fail to Resume Gas Deliveries to EU,” European Commission, January 

15, 2009, available at <http://ec.europa.eu/news/energy/090115_1_

en.htm>. 

2 “Russia Agrees to Ease Ukraine Gas Supply Terms,” BBC 

News, November 20, 2009, available at <http://news.bbc.co.uk/2/

hi/8369705.stm>. 

3 “EU, Russia Strike Deal on Monitoring Gas Flow,” CBC 

News, January 8, 2009, available at <www.cbc.ca /world/story/2009/01/08/europe-gas.html>.

4 European Commission, EU Energy in Figures 2010, available 

at <http://ec.europa.eu/energy/publications/statistics/doc/2010_energy_transport_figures.pdf>. 

5 British Petroleum, “Trade Movements 2008 by Pipeline,” 

in Statistical Review of World Energy 2008, available at <www.

bp.com/liveassets/bp_internet/globalbp/globalbp_uk_english/reports_and_publications/statistical_energy_review_2008/STAGING/

local_assets/2009_downloads/gas_table_of_natural_gas_trade_movements_by_pipeline_2009.pdf>; Yu Xiang, “European Energy Security 

Challenges and Solutions,” China Institute for Contemporary International Relations, 2009. 

6 Maureen Crandall, “Who is Bypassing Whom? Russian, European and Caspian Gas and Oil,” paper presented at 32d

 International 

Association for Energy Economics Conference, 2009.

7 Eurogas, “2007 Natural Gas Demand and Supply Long Term 

Outlook to 2030,” available at <www.eurogas.org/uploaded/Eurogas%20long%20term%20outlook%20to%202030%20-%20final.pdf>.

8 Russia further increases its leverage over Europe through tactics such as signing contracts with individual countries at discretionary 

prices, purchasing energy infrastructure in Europe, and strategically 

entering ventures with European energy companies.

9 “Russia-Ukraine Gas Dispute Remains Unsettled,” RIANovosti, December 20, 2005, available at <http://en.rian.ru/ russia/20051220/42586383.html>.

10 “Ukraine: A Natural Gas Consortium Proposal,” February 15, 

2010, available at <www.stratfor.com/analysis/20100215_ukraine_natural_gas_consortium_proposal>.

11 Bernard Gwertzman, interview with Steven Pifer, “Delivering Tough Love to Ukraine, Georgia,” July 24, 2009, available 
www.ndu.edu/inss SF No. 264 15 

at <www.cfr.org/publication/19906/delivering_tough_love_to_

ukraine_georgia.html>.

12 Jonathan Stern, “The Russian-Ukrainian Gas Crisis of January 

2006,” Oxford Institute for Energy Studies, January 16, 2006, available at <www.oxfordenergy.org/pdfs/ comment_0106.pdf>. 

13 Radio Free Europe/Radio Liberty, interview with Celeste 

Wallander, “Russia: Moscow and Energy Leverage,” December 5, 

2005, available at <www.rferl.org/content/article/1063524.html>.

14 Edward C. Chow, “Energy Bungling,” The Kyiv Post, August 

29, 2010, available at <www.kyivpost.com/news/opinion/op_ed/detail/80304/>.

15 Ibid.

16 “Ukraine Challenges 1.7bln Gas Deal with Russia,” Reuters, 

October 13, 2010, available at <http://af.reuters.com/article/energyOilNews/idAFLDE69C0TF20101013>.

17 Jason Bush, “Gas Pipelines: South Stream Gets a Boost,” 

Business Week, May 18, 2009, available at <www.businessweek.com/

globalbiz/content/may2009/gb20090518_424303.htm>. 

18 See, for instance, “Natural Gas, An Unconventional Glut,” 

The Economist, March 11, 2010, available at <www.economist.com/

business-finance/displaystory.cfm?story_id=15661889>.

19 Guy Chazan, “A New Route for Natural Gas to Europe,” The 

Wall Street Journal, November 6, 2009, available at <http://online.wsj.

com/article/SB125743139771530815. html>; “Nord Stream,” available at <www.nord-stream.com/en/>; “Natural Gas, An Unconventional Glut.” 

20 Chazan; Paul J. Saunders, “Russian Energy and European Security: A Transatlantic Dialogue,” The Nixon Center, February 2008, 

14, available at <www.nixoncenter.org/monographs/saunders08.pdf>.

21 Chazan; “Nord Stream.” 

22 A consideration that we do not address here is the possibility 

that European gas production will increase due to new shale gas extraction techniques. While these techniques have played an important 

role in the United States, there is little agreement about how much 

impact they will have in Europe.

23 Bush.

24 Radio Free Europe/Radio Liberty, “Factsheet: Russian Gas 

Export Pipelines,” available at <www.rferl.org/content/Russian_Gas_ 

Export_Pipelines_Projects/1366873.html>. 

25 Boris Nemtsov and Vladimir Milov, “Putin and Gazprom: An 

Independent Expert Report,” Moscow, 2008, 21, available at <www.

docstoc.com/docs/1603180/Nemtsov-White-Paper-Part-II----

Gazprom>. 

26 “Russia, Italy: A Productive Agreement on South Stream,” 

May 15, 2009, available at <www.stratfor.com/analysis/20090515_russia_italy_productive_agreement_south_stream>. 

27 Judy Dempsey and Stephen Castle, “Putin Proposes Deal to 

Settle Gas Crisis,” The New York Times, January 16, 2009, available at <www.nytimes.com/2009/01/16/world/europe/16iht-gazprom.4.19439569.html>. 

28 International Energy Agency, “Ukraine Energy Policy Review,” OECD, 2006.

29 Edward C. Chow and Jonathan Elkind, “Where East Meets 

West: European Gas and Ukrainian Reality,” Washington Quarterly

32, no. 1 (Winter 2008/2009), available at <www.twq.com/09winter/

docs/09jan_ChowElkind.pdf>. 

30 Economist Intelligence Unit, “Country Report: Ukraine,” 

March 2010.

31 Daryna Krasnolutska, “Ukraine Tells Naftogaz to Pay for Russian Gas, Seeks Price Cut,” Business Week, March 19, 2010, available at 

<www.businessweek.com/news/2010-03-19/ukraine-tells-naftogazto-pay-for-russian-gas-seeks-price-cut.html>. 

32 Stern; Vladimir Socor, “Russia Seeks Control of Ukraine’s Gas 

Transit System Through a Consortium,” Eurasian Daily Monitor 6, no. 

9 ( January 15, 2009), available at <www.jamestown.org/ single/?no_

cache=1&tx_ttnews%5Btt_news%5D=34357>. 

33 Edward C. Chow, “Bad Deal All Around,” The Kyiv Post, April 

26, 2010. 

34 Joint EU-Ukraine International Investment Conference on 

the Modernization of Ukraine’s Gas Transit System, Joint Declaration, March 23, 2009, available at <http://ec.europa.eu/external_relations/energy/ events/eu_ukraine_2009/joint_declaration_en.pdf>. 

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National Strategic Studies provides advice to the Secretary of Defense, Chairman of the Joint Chiefs of Staff, and 

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INSS
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