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Kuros
Joined: 27 Apr 2004
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 Posted: Mon Jan 19, 2009 3:58 pm Post subject: Ukraine goes too far |
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The corruption and graft in the Ukrainian gov't natural gas sector has resulted in Russia halting gas to all of Europe.
Russia and Ukraine: Cold Snap
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Gazprom, the largely state-owned Russian gas monopoly, pumps 80 percent of the gas that it sells to the European Union (its highest-paying customer) through pipelines that were laid across Ukraine during the Soviet era. As the expiration date for Gazprom�s 2008 contract with Ukraine�s state gas company (Naftogaz) approached, negotiations faltered. Naftogaz rejected Gazprom�s proposed 2009 price hike, which would have more than doubled the price from $179.50 per thousand cubic meters of gas to $418. Naftogaz instead offered to pay $201. In response, Russia cut its price to $250, which Putin dubbed �a humanitarian gesture,� made in awareness of Ukraine�s deepening economic crisis, and pointing out that real-world gas market prices are roughly double that amount. (Though for years it has warned former Soviet republics that it would start billing them at market rates, Russia has continued to subsidize Ukraine, Belarus, and Moldova with cheap gas.) Ukraine balked at $250, and counter-offered $235. At this point Gazprom abruptly reinstated its previous quotation of $418 per 1,000 cubic meters.
In the midst of this impasse, Kremlin bells rang in the New Year. Since no agreement had been reached, Russia reduced the flow of gas it pumped to (and across) Ukraine by the amount previously slated for the Ukrainian market. Yet gas continued to heat Ukrainian homes and fuel their stoves. (Certainly it did in Kiev, where I was at the time.) There was a simple explanation for this. As Gazprom boss Aleksey Miller informed Putin in a televised conversation on January 6th (which is Christmas Eve by the Russian Orthodox calendar), Ukraine was �stealing� 15 percent of the transshipped gas, and the percentage was rising �hour by hour.� (Ukraine responded that it was only collecting �transit fees� in kind.) Never one to issue an empty threat, Putin, who had already warned Ukraine of �severe consequences� should it interfere with Gazprom deliveries to Europe, promptly announced that Russia was turning off the gas. Eastern Europeans thereupon began freezing in their homes, and diminished gas flows were perceptible as far away as France and Italy. As bad as things were, they might have been worse had some European countries not mandated increased gas stocks to meet such an eventuality in the aftermath of the 2006 crisis.
As for the compromise deal that was eventually struck on the 8th, it does not specify how much Russian gas will cost Ukraine this time, but in a phone call on January 7th, Russian President Dmitry Medvedev told Ukrainian President Viktor Yushchenko that, �For the resumption of natural gas supplies to Ukrainian consumers, it is necessary to conclude a new contract between Gazprom and Naftogaz at the market European price without discounts and privileges.� If that�s true, then Ukraine has badly overplayed its hand. Just as its economy is tanking, Ukraine may have lost vital Russian gas subsidies. |
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soviet_man
Joined: 23 Apr 2005
Location: Seoul
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| Posted: Wed Jan 21, 2009 4:19 pm Post subject: |
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| Ukraine balked at $250, and counter-offered $235. At this point Gazprom abruptly reinstated its previous quotation of $418 per 1,000 cubic meters. |
 There is significant anti-Russian sentiment in Ukraine. They will rightly pay for that one way or another. |
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bassexpander
Joined: 13 Sep 2007
Location: Someplace you'd rather be.
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| Posted: Wed Jan 21, 2009 4:23 pm Post subject: |
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In any case, this will all have long-term effects on how much gas Russia can sell to Europe. It's done a lot to highlight Europe's dependence on Russia for natural gas. That was all fine and dandy while the gas flowed. Europe now sees how it can be used as a weapon against them, and they will now seek alternative methods. They now realize just how much they've hamstringed themselves to relying too much on a (former?) enemy.
In the end, this will hurt Russian profits a great deal. |
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