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Don't forget that there are two Ukrainian gas businesses:

  • the official one, whereby the national Ukrainian gas company gets a given volume of gas (around 20-25bcm/y) in exchange for transit fees for Russian exports further West. This is a mostly fair deal for both sides, although it allows for lots of funny accounting

  • the shady one, where shady intermediaries linked to Gazprom sell to shady buyers in Ukraine, which onsell to friends and other clients at lowish prices and take a nice cut along the way, shared with the Russian intermediary. Gazprom gets very little money on that chunk of the business, and final customers get a more or less good price depending on how friendly they are with the intermediaries.

Clans fight permanently to be the preferred party to that second deal, and the clans that have control over the national Ukrainian gas company can use that position to blackmail Gazprom, or rather those of its Russian managers involved in that trade, into better side deals. Occasioanlly, those 'side' facts spill into the open.

There is also some fighting over the first deal, as gas prices go up while transit prices don't seem to need to change as much, and Gazprom gets unhappy about the original deal (although note that in 2006, it was Ukraine that chose to re-open the issue despite then benefitting form a 5-year contract frawmework with favorable prices in that respect, ie a guaranteed volume of gas for free for 5 years).

So imagine Shell coming with its gas at the Russian-Ukrainian border.  It will be willing to pay market rates for gas transit - to the Ukrainian gas company. But the gas can still be siphoned out by Ukrainians, becuase they can - the question then become, (i) why would they do that (because gas is valuable and they can onsell it), (ii) who can do something about it (the Ukrianian authorities, but could luck with that), and (iii) what can Shell do (they have nothing to offer, unlike the Gazprom managers who can offer to allocate company income for personal gain)?

Like I said, it would quickly put Ukraine in an interesting spot, and Gazprom in an even more interestign one, because they (well, again, its managers) would actually have solutions that would get Shell some money... if not the amounts they's expect.

In the long run, we're all dead. John Maynard Keynes

by Jerome a Paris (etg@eurotrib.com) on Thu Aug 28th, 2008 at 06:59:55 AM EST
[ Parent ]
Given that
In the business period of her life, Tymoshenko involved business relations (either co-operative or hostile) with many important figures of Ukraine, first of all, in Dnipropetrovsk. The list includes Pavlo Lazarenko, Viktor Pinchuk, Ihor Kolomoyskyi, Rinat Akhmetov, and, of course, Leonid Kuchma who at that time was the President. All of them were originating from Dnipropetrovsk. As part of her gas-dealing business, Tymoshenko has also been closely linked to the management of the Russian Gazprom.
Maybe as long as Tymoshenko is PM the official and shady sides will be on the same page?

Or is the Dnipropetrovsk clan the same as the Gazprom faction?

And what is the deal with RosUkrEnergo?

A vivid image of what should exist acts as a surrogate for reality. Pursuit of the image then prevents pursuit of the reality -- John K. Galbraith

by Migeru (migeru at eurotrib dot com) on Thu Aug 28th, 2008 at 07:04:45 AM EST
[ Parent ]

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