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Gazprom Cuts Gas Supplies to Ukraine ¶ Hungary-Poland Gas Disrupted ¶ Pipeline & Ecology

by Oui Sun Jan 1st, 2006 at 06:29:52 AM EST


LATEST NEWS FROM GAZPROM ::

Russia Will Send Extra 95mln m³ a Day to End Shortage

France, Italy, Germany, Hungary and Poland were among those reporting falling volumes.


Hungary says normal gas supplies
have now been restored

Russia says it will pump more gas to Europe after various countries said their supplies had fallen by up to 40% after Moscow cut Ukraine's provision.

My diary @BooMan’s ::
Russia Vows to End Gas Shortage to Europe

Update [2006-1-1 00:32AM PST by Oui]:

Russia's Gazprom Shuts Off Natural Gas Supplies to Ukraine

Jan. 1 (Bloomberg) -- Russia's OAO Gazprom cut off natural gas supplies to Ukraine after the country refused to pay more than four times 2005's rate for the fuel, deepening tensions between the two former Soviet republics.

State-run Gazprom, which supplies a quarter of Ukraine's gas and uses the country's pipelines to supply a quarter of western Europe's, began to shut off supplies to Ukraine at 10 a.m. local time today, Sergei Kupriyanov, a spokesman for the Moscow-based company, said on its NTV television network. "The Ukrainian side is to blame for this. They rejected our offer."

Ukraine has enough fuel stored to last four months, and both sides have said supplies to western Europe won't be affected.

Read on …

Read on »»


Gazprom, Naftogaz to Continue Crucial Gas Talks

MOSCOW, December 30 (RIA Novosti) - Russian energy giant Gazprom and Ukrainian national gas company Naftogaz will continue their attempts to solve a bitter dispute over natural gas supplies and transit today.

Russia offered a $3.6-billion loan to help Ukraine cover its expenses during the move to market prices, but Ukrainian leader Viktor Yushchenko rejected it, saying the country should "pay for itself."

The dispute between Russia and Ukraine on supplies and transit of natural gas reached it peak after Gazprom proposed selling natural gas to Ukraine for $220-$230 per 1,000 cubic meters and threatened to cut off the supplies if Ukraine refused to sign a revised contract. Ukraine currently pays about $50 per 1,000 cubic meters under a barter agreement.


Ukrainians protest against Russian gas demands

Although Russian President Vladimir Putin subjected senior managers in the two countries' energy sectors to some stinging criticism - he all but accused them of creating a crisis in bilateral relations - Gazprom seems to be sticking to its guns.

Echoing previous statements from the monopoly's leadership, spokesman Sergei Kupriyanov said the company would cut off the supplies of natural gas to Ukraine on January 1 if the parties failed to reach an agreement." He said the Ukrainian proposals did not reflect the current market situation and prices on the European markets. "They pay more than $250 everywhere," he said. "The $65 or $80 offer is completely out of market range."

In turn, Ukraine has said it will raise the transit fees Gazprom has to pay to send its gas to crucial European markets from $1.07 to $3.5 per 1,000 cu m per 100 km for the transit of Russian natural gas to Europe via Ukraine.

A&A Energy Security Briefing - November 2005   (pdf file)
Ukraine and Iran discuss oil deliveries to Europe

Trouble in the Pipeline for Schröder

BERLIN Dec. 11 -- Former German chancellor Gerhard Schröder has become embroiled in a sleaze row for accepting a lucrative job with a Russian gas consortium just months after the government he headed had allowed the firm to go ahead with a contract worth £2.7bn. The government approved a controversial new pipeline through the Baltic Sea that will pump Russian gas to markets in Germany and the rest of Western Europe.

  «« click on pic for story

Schröder has taken up a senior position on the board of the North European Gas Pipeline consortium (NEGP), which is controlled by Gazprom. German media reports estimate the pay to be between £150,000 and £500,000 a year. The job is being widely regarded as a gift from Vladimir Putin, the Russian president.

Another ally of Putin, Matthias Warnig, the head of Dresdner Bank's operations in Russia, has been named the chief executive of NEGP.

"Treason doth never prosper: what's the reason?
For if it prosper, none dare call it treason."

▼ ▼ ▼ RELATED READING

Making Sense of the Russian-Ukrainian Gas Spat
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Russian-Ukrainian Gas Dispute May Affect Germany
Caspian Oil - A Sunday Special
Ukraine vs Russia: Tales of Pipelines and Dependence ◊ by Jérôme a Paris
Putin 2-Day State Visit to The Netherlands ¶ Busy Business Schedule

Display:
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Gas Geopolitics
By Alexei Makarkin, deputy director general of the Center for Political Technologies.

MOSCOW (RIA Novosti) Dec.27 --  Gas prices have become the central issue in relations between post-Soviet countries. Ukraine, Georgia and Moldova, which recently set up the Union of Democratic Choice (UDC), a geopolitical alternative to Russia, are all consumers of Russian gas.

Until now Russia tried to preserve subsidies for its CIS partners, believing that this way it will keep them within its orbit. The dubious results of this policy became evident long ago.


Presidents of Ukraine Victor Yushchenko
and of Georgia, Mikheil Saakashvili.

MOLDOVA and GEORGIA

Moldovan Communists began their rule with pro-Russian rhetoric and announcing plans to give the Russian language official status. Later, however, they appealed to the West seeking to abandon the so-called Kozak plan of the Transdnestr settlement, which, by the way, envisaged the official status for Russian.

In the past, Ukraine, Georgia and Moldova often maneuvered between Russia and the West, but now their geopolitical priorities have been determined clearly. The governments and most elites in these countries are openly pro-Western, although still mentioning the need to develop relations with Russia. In Georgia parliamentary opposition criticizes Russia even more harshly than the Mikhail Saakashvili government.

Observers were surprised to learn that Gazprom will raise the gas price from $63 to $110 per 1,000 cu m for Georgia and from $50 to $230 for Ukraine. The difference is too great to be accidental. The fact is that Russia is pursuing two aims at once. The first one is to raise Gazprom's earnings, as it is one of the biggest contributors to the country's budget. The other is to try to establish control over gas pipelines in the countries in question.

Russia is sending a signal that if it gets the pipeline, the gas price set now will remain stable for a long time. Apparently, there is a chance that at the next talks economic considerations will prevail over Tbilisi's political ambitions. If, however, this does not happen, Russia is likely to raise gas prices once again.

UKRAINE

The situation in Ukraine is different. The agreement on joint management of its gas transportation network was reached in 2002, when the parties announced the creation of a Russian-Ukrainian consortium, which was also to involve Germany. But it was not implemented under Kuchma, and was discarded under Yushchenko. It resulted in the shockingly tough stance adopted by Russia, which had been disappointed by usual protracted talks and decided to escalate the situation in order to force Ukraine to change its view on the consortium.

This means that Russia is not trying to settle the score with its geopolitical opponents, but is being very pragmatic (while differentiating between them), in an attempt to support its own economic expansion in former Soviet republics, using all available leverages.

Russian as official language to be abandoned in East Ukraine!
Ukraine Raises $12 mln for President's Luxury Plane

Comment cross-posted from my diary ::
EU Gas Import to be Cut? Ukraine Politics, Jobs, Fees, Pipeline & Ecology ◊ Oui @BooTrib

"Treason doth never prosper: what's the reason?
For if it prosper, none dare call it treason."

▼ ▼ ▼ MY DIARY

'Sapere aude'

by Oui (Oui) on Sun Jan 1st, 2006 at 06:35:02 AM EST
.
Putin Offers Compromise to Break Russia-Ukraine Gas Deadlock

Putin said Ukraine could receive Russian gas at existing lower prices until April and then switch to the four-fold increase being demanded by state-controlled gas giant Gazprom.

    "I will instruct the government and Gazprom to ensure gas deliveries in the first quarter of 2006, with the conditions and rates of 2005. The condition is that before the end of today, the Ukrainian partners sign the contract with Gazprom's offer for switching to market prices in the second quarter."

"Treason doth never prosper: what's the reason?
For if it prosper, none dare call it treason."

▼ ▼ ▼ MY DIARY

'Sapere aude'

by Oui (Oui) on Sun Jan 1st, 2006 at 06:37:30 AM EST
.
EU Countries feel Impact of Russian gas cuts

BRUSSELS (RTE News) Jan. 1, 2006 -- EU nations have started to feel the impact of Russia's decision to cut its gas supplies to Ukraine. Russia's state-run firm Gazprom cut Ukrainian supplies by a quarter after Kiev refused to sign a new contract seeking a 400% price increase.

Hungary and Poland were the first EU states to have supplies disrupted.

Read on ...

Gazprom and Beltransgaz signed contract on supply and transit of gas in 2006
Cedric Brown, non-executive chairman at Eural Trans Gas

"Treason doth never prosper: what's the reason?
For if it prosper, none dare call it treason."
 

▼▼▼ READ MY DIARY ▼

'Sapere aude'

by Oui (Oui) on Sun Jan 1st, 2006 at 06:34:31 PM EST
[ Parent ]
.
Saw the diary title, came over to nominate Cindy Sheehan and Patrick Fitzgerald for the U.S., with hope for the New Year: Ohio war veteran Paul Hackett.

For Europe I would go for Vladimir Putin and new German Chancellor Angela Merkel, a person for change in 2006 and leader of Europe's largest economy with 83 million people. Putin for impact of a President on a vast nation, Russia, and the former Soviet satellite states, envied by George Bush and his cronies in the U.S. Administration.

Political Scandal for 2006 ::

  «« click on pic for story
Jack Abramoff with lawyer before Congress,
an example for many Republicans in the coming year.

"Treason doth never prosper: what's the reason?
For if it prosper, none dare call it treason."

▼ ▼ ▼ MY DIARY

'Sapere aude'

by Oui (Oui) on Sun Jan 1st, 2006 at 06:41:07 AM EST
.
Best Wishes to all - especially in Good Health or Sustainability in recovering from any illness at present.

In The Hague a lot of fireworks displayed throughout the city center and suburbs. To avoid nasty crowd troubles, the city is now renowned for supporting neighborhood party coordination. To avoid large bonfires in city streets, the city council has given permission for large bonfires on the beach of the North Sea. Nasty rioting has been prevented in the last ten years!

Eurovision television has the traditional


Johann Strauss Waltz Concerts

Austria btw will have EU Presidency first six months and Putin's Russia will lead the G8 Nations on Finance and Economy. First item for discussion: democratic content of member nations and gas & oil distribution throughout the World - read U.S. and all Western energy consumers. I wonder whether there is any knowledge of assets to be found in the environment, climate and ecology.

Let 2006 be an EARTH YEAR :: have people unite globally to retake true democracy, whereby its leaders represent voters and not corporations.

Eisenhower's Message to his country!

Listeners all around the world can experience the New Year's Concert live on the internet by way of Live-Stream beginning at 11:15 CET.

"Treason doth never prosper: what's the reason?
For if it prosper, none dare call it treason."

▼ ▼ ▼ MY DIARY

'Sapere aude'

by Oui (Oui) on Sun Jan 1st, 2006 at 06:44:05 AM EST
.
Thanks ask - impression in memory of an Austrian New Year, but you are right of course its a German event where Olympic games were held.

  ««  click on pic for map

Garmisch-Partenkirchen

"Treason doth never prosper: what's the reason?
For if it prosper, none dare call it treason."
 

▼▼▼ READ MY DIARY ▼

'Sapere aude'

by Oui (Oui) on Sun Jan 1st, 2006 at 09:48:15 AM EST
[ Parent ]
Why would anyone be surprised. The Ukraine elected a government that didnt want to be allied with Russia. The Russians decided cheap gas was only for allies. The Ukrainians decided they wouldnt pay more. All equals gas turned off.
Russia looks to build new pipeline to the North not passing through unfriendly territory to supply the energy guzzling but resource lacking EU.
In the meantime if the Ukrainians agree to higher prices  (and probably less than 400%) the gas gets turned back on down south. If the Ukrainians dont compromise their domestic gas price soars, their economy wobbles. Next election finds Yushenko not so popular after mishandling another issue.
by observer393 on Mon Jan 2nd, 2006 at 12:51:52 AM EST
A few bits of info

  • Ukraine does pay commercial rates for its gas, but as it is not paid in cash, but in barter for transit fees, the price it is expressed in is essentially meaningless (which suggests that the simple solution is to increase both gas prices and transit fees, to save face)

  • the Northern pipe will not replace the Ukrainian ones, as it is meant for ADDITIONAL volumes

  • the Ukrainian consumers already pay pretty much full rates for their gas; what is at stake is who gets that money: Ukrainian oligarchs or Russian ones. with the change in government in Ukraine, I suspect that either new Ukrainians are trying to grab a bit of the pie (and the "old Ukrainians" and the Russians are trying to keep them out) or Yuschenko is trying to clean up that business and pissing off those that used to profit. The fact that this has ascalated so much and so publicly makes me think this is plausible.


In the long run, we're all dead. John Maynard Keynes
by Jerome a Paris (etg@eurotrib.com) on Mon Jan 2nd, 2006 at 06:00:30 AM EST
[ Parent ]
Russia's Gas Showdown"


"The essence of the policy's new direction is not to restore the influence of Russia, which has been allegedly lost in the process of orange revolutions," the official said on condition of anonymity. However, he added, Russia would not tolerate an arrangement in which it receives neither economic nor political benefits from selling discounted oil and gas.

The criteria for having the tiff now: Ukraine under anything but an expressly pro-Russian leadership gets to pay full market price.

Elsewhere, we see this exchange...


Last week, officials in Kiev suggested that Ukraine raise rent prices for the housing of Russia's Black Sea Fleet in the Ukrainian port of Sevastopol. On Tuesday, Russian Defense Minister Sergei Ivanov indicated in response that Kiev could not legally raise the rent prices, which are laid out in a contract that is valid until 2017.

Which raises the issue of why Ukraine cannot void the contract using the same rationale asserted by the Russians when they cut the gas.

Then there is the matter of diversified supplies, which Ukraine enjoys, though much of Europe does not:


In 2005, Ukraine imported 25 billion cubic meters of natural gas from Russia, 38 billion cubic meters from Turkmenistan, and extracted 18 billion cubic meters internally.

Now, a quick look at a map will point out that Turkmeni gas has to pass through the Russian network in order to get to Ukraine. A listing of Route options, existing and planned details that Turkmenistan uses the Central Asia-Center Pipeline system to connect to the Russian grid at Saratov and "is using this pipeline to export a total of 8.83 Tcf to Ukraine (via Russia) from 2002 to 2006, as well as smaller amounts to Russia."

The Russians, if inclined, could cut that supply off as well, though at the price of forcing a confrontation with the United States.

However, Russia and China are staunch allies. One of the now five year-old Shanghai Cooperation Organization's goals is to maintain strategic control over the energy reserves of Central Asia, as opposed to letting a non-Asian power (read: the United States or Europe) enjoy that role. Getting access to this energy is the main reason why India has been flirting with membership in SCO, and mending fences and making new friends -- with Pakistan and Iran, respectively.

Have Keyboard. Will Travel. :)

by cskendrick (cs ke nd ri c k @h ot m ail dot c om) on Mon Jan 2nd, 2006 at 08:25:54 AM EST
[ Parent ]

Which raises the issue of why Ukraine cannot void the contract using the same rationale asserted by the Russians when they cut the gas.

Well, because there is no gas contract for 2006 between Naftogas and Gazrprom and this one is commercial contract, whereas fleet agreement is a package international treaty which includes Russia's recognition of Ukraine's borders.


The Russians, if inclined, could cut that supply off as well, though at the price of forcing a confrontation with the United States.

There is no Turkmen gas for the first quarter of 2006 for Ukraine: this gas is all bought out by Gazprom.

by blackhawk on Mon Jan 2nd, 2006 at 09:05:54 AM EST
[ Parent ]
Then makes the squeeze play.

I think that just about kills the optimistic scenario.

The Russians are going for the jugular, here.

Have Keyboard. Will Travel. :)

by cskendrick (cs ke nd ri c k @h ot m ail dot c om) on Mon Jan 2nd, 2006 at 09:38:17 AM EST
[ Parent ]
There is no competing sources and never were: Gazprom controls gas and the pipeline.
by blackhawk on Mon Jan 2nd, 2006 at 10:33:05 AM EST
[ Parent ]
I agree on that. But the "Turkmen" gas creates a convenient fiction as it is more difficult for Ukrainians to justify stealing transit gas from Gazprom when they are not paying "Turkmens".

In the long run, we're all dead. John Maynard Keynes
by Jerome a Paris (etg@eurotrib.com) on Mon Jan 2nd, 2006 at 10:38:05 AM EST
[ Parent ]


  • Ukraine does pay commercial rates for its gas, but as it is not paid in cash, but in barter for transit fees, the price it is expressed in is essentially meaningless (which suggests that the simple solution is to increase both gas prices and transit fees, to save face)


Ukraine does not pay anywhere near commercial rates for gas. Current rate for Ukraine is 50$ 1,000 cubic metres of gas and 1.09$ for the transit of the same amount per 100 km. This price is real for all intents and purposes. Say, when Ukraine steals gas from the pipeline in order to sell to Romania for 250$, 50$ is what Ukraine owes Gazprom.

Proportional inrease to 250$ gas/5$ transit will make Ukraine transit fee way above max market rates (2.5$).



  • the Ukrainian consumers already pay pretty much full rates for their gas; what is at stake is who gets that money: Ukrainian oligarchs or Russian ones. with the change in government in Ukraine, I suspect that either new Ukrainians are trying to grab a bit of the pie (and the "old Ukrainians" and the Russians are trying to keep them out) or Yuschenko is trying to clean up that business and pissing off those that used to profit. The fact that this has ascalated so much and so publicly makes me think this is plausible.


Not true; residential rates used to be around 40$, industrial around 60$ (that's why 50$ above is real). Gas bill for appartment can be around 1$ for unmetered appartments.

For Gazprom main issues are that gas and transit fees are tied and the fact that Ukraine can steal gas at any point and resell for 250$.

by blackhawk on Mon Jan 2nd, 2006 at 08:59:51 AM EST
[ Parent ]
The reselling to other countries has always been negligible, because the transfer points are heavily monitored by Russia, for obvious reasons.

The retail and industrial prices you mention are the official ones, not the real ones that you need to pay if you actually want gas (I am talking about large users like local distributors). The intermediaries get good revenues form the final consumers - the question is who they pay it to, or who they share it with.

See my new story on the front page.

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

by Jerome a Paris (etg@eurotrib.com) on Mon Jan 2nd, 2006 at 09:27:13 AM EST
[ Parent ]
Last year Ukraine "lost" 7,8 billion cubic metres in one shot, yesterday it was 100 milion cubic metres. Annual gas exports from Ukraine is 5-6 billion metres, not exactly negligible.

How different are nominal prices from local distributor's prices? They should be pretty much the same. Gas is dirt cheap for end users, otherwise Ukraine would not be #6 gas user in the world with #32 economy.

by blackhawk on Mon Jan 2nd, 2006 at 09:57:24 AM EST
[ Parent ]
What do you mean by the price is "real"? Both the nominal gas price and the nominal transit price are low by international standards. There are good arguments to augment both. They have been set simply to offset one another and have no economic value per se.

So "commercial" terms would mean oil-indexed prices for the gas, and "what the market will bear" for transit fees. Ukraine, having absolute control over Russian exports, can capture the rent and set whatever transit price it wants. The current status quo (25 bcm/y of gas vs transit rights) is a great deal for Russia - this is not what this dispute is about.

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

by Jerome a Paris (etg@eurotrib.com) on Mon Jan 2nd, 2006 at 09:30:18 AM EST
[ Parent ]
They have perfect economic value which makes them real:

every time Ukraine steals gas, that is the amount Gazprom gets back;
current ratio is tilted into Ukraine's favour;
Gazprom transit fees for Turkmen gas can be made the same as Ukraine's fees for Gazprom gas;
that is the amount Ukraine will pay for the gas in the first quater of 2006 and after 2007, when Turkmen gas is being bought by Gazprom.

Ukraine can not charge whatever it wants for the transit (well, no more than Russia can charge for the gas, being the only supplier), and one of the reasons being that Turkmen gas goes through Russian pipeline.

As for the price, Gazprom is talking about 12 bcm/y, so it does not seem to think that the price is great.

by blackhawk on Mon Jan 2nd, 2006 at 10:15:37 AM EST
[ Parent ]
There is no such thing as "Turkmen gas", it is an illusion created by Gazprom management to capture value in Ukraine at the expense of Naftogaz AND of Gazprom. Yushenko has disrupted that cozy arrangement, that's what this is about.

(Obviously, there is gas physically coming from  Turkmenistan, but it is bought dirt cheap as Turkmenistan has no other option - the Turkmenbashi doesn't care as he is part of this scam, obviously, and has few people he needs to share with)

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

by Jerome a Paris (etg@eurotrib.com) on Mon Jan 2nd, 2006 at 10:34:52 AM EST
[ Parent ]
You are pointing at the wrong side.

The only way to "capture value" is to buy for 50$ and resell for 250$ and this done by Naftogaz/Ukraine.

Gazprom suggest market rate which will make this impossible, Yushenko tries to keep this arrangement.

by blackhawk on Mon Jan 2nd, 2006 at 10:39:40 AM EST
[ Parent ]
Let's not pretend as though Gazprom gives a damn about market prices.  Energy markets are nowhere near perfectly competitive, and, despite all the complaining about Ukraine not paying the "market price," Gazprom turned in a 10% profit (over $6 billion) this year.

And a $1.5 billion difference, which an above comment (written by you, I believe) argued the Ukrainians should just pay, may not sound like a lot of money, if you live in the US, Western Europe or Russia, but, when your GDP is only about $300 billion, it's a lot of money.  It's easy to advocate coughing up the money when your country has it or can easily afford to borrow it.

The entire issue seems to be more political than economic.  Former Soviet Republics who have agreed to play nice with Moscow are getting gas for less than half the price being demanded from Ukraine -- even less than the former rate in Ukraine for Belarus.  You're seriously arguing that this has nothing to do with politics?

Be nice to America. Or we'll bring democracy to your country.

by Drew J Jones (pedobear@pennstatefootball.com) on Mon Jan 2nd, 2006 at 02:37:02 PM EST
[ Parent ]
I'm saying that Gazprom as a private company is interested in more profit.

The fact that Ukraine is poor (real or perceived) does not mean it can steal whatever gas it wants.

Russia's government already offered a loan, which was rejected. Gazprom also offered lower gas prices for the share in gas pipelines and Ukraine was not interested. So the problem is not with money.

Belarus never had problems with theft, and Gazprom has a share in pipeline. From Gazprom point of view, low gas prices is a payment for the pipeline ownership.

by blackhawk on Mon Jan 2nd, 2006 at 08:36:38 PM EST
[ Parent ]
Who are they selling gas to at 250$/tcm? And in such huge volumes? Not any of their Western or Southern neighbors, that's for sure.

In the long run, we're all dead. John Maynard Keynes
by Jerome a Paris (etg@eurotrib.com) on Mon Jan 2nd, 2006 at 03:30:47 PM EST
[ Parent ]
This year at least Romania pays this rate.
by blackhawk on Mon Jan 2nd, 2006 at 08:21:27 PM EST
[ Parent ]
They probably pay this rate, but they pay it to Russia, don't they? Do you have any link to any such large scale transaction between Ukraine and Romania?? A transactino that would use 25-30% of the capacity of Gazprom's export pipelines to Turkey, Greece and Bulgaria?

In the long run, we're all dead. John Maynard Keynes
by Jerome a Paris (etg@eurotrib.com) on Tue Jan 3rd, 2006 at 10:04:06 AM EST
[ Parent ]
What I'm wondering about is whether this gas goes through Transnistria? If yes, Russia should have a strong lever there.

*Lunatic*, n.
One whose delusions are out of fashion.
by DoDo on Tue Jan 3rd, 2006 at 04:45:04 PM EST
[ Parent ]
It does, go have a look in my story on Dec. 30, all the mpas are there.

In the long run, we're all dead. John Maynard Keynes
by Jerome a Paris (etg@eurotrib.com) on Tue Jan 3rd, 2006 at 05:45:32 PM EST
[ Parent ]
This is not the case. I am actually in Russia right now, and just listening to the news from both State-run and independent (few) media outlets, the picture is quite muddled. However, there are some things to clear up:

  1. There's no doubt this move is politically motivated. Obviously Russia is interested in providing cheap natural resources to its strategic partners, just as the US or any other country would do in other cases. The politics behind this are quite annoying, but not unusual. One thing for sure, I would prefer all prices to be controlled by the marketplace, not some political agreements, and for that I blame Russia and other governments.

  2. Ukraine does not pay commercial rates for gas, nor does Russia pay commercial rates for transit. However, when you offset the two, the difference is still quite staggering. Russia sells gas for less to Ukraine than it does internally. The impact of Ukraine's increasing its transit rates to commercial levels would mean Russia would have to fork out extra $1.5 billion. The impact of Russia's increasing gas prices to commercial levels would mean Ukraine would have to fork out around $3.0 billion more. In other words, the difference is $1.5 billion. If I were Yuschenko, regardless of who is right and who is wrong, I would have taken this option, and come out a bigger man and a bigger politician than Putin. This would have been a more stable and pragmatic approach both internally and externally. $1.5 billion is a lot of money, but it's hardly worth the bickering and political capital it will cost Yuschenko (Yanukovich is loving this situation right now).

Again, I want to reiterate by no means do I support Russia's selective pricing. However, it is not uncommon when countries give special deals to strategic partners. What's more worrisome is the level to which this problem has escalated.

Thanks!

Mikhail from SF

by Tsarrio (dj_tsar@yahoo.com) on Mon Jan 2nd, 2006 at 09:34:46 AM EST
[ Parent ]
Don't forget that official prices apply to volumes which are rationed. If you want more, you have to pay more, and that's where the "independent" distributors come in. It's the same in Russia, where Gazprom has been pretending for year to be "running out of gas" to avoid delivering gas cheaply to the population. Grey market gas is much more expensive in Russia as well, and the difference goes for a big part in the pockets of the Gazprom managers that control the network.

In the long run, we're all dead. John Maynard Keynes
by Jerome a Paris (etg@eurotrib.com) on Mon Jan 2nd, 2006 at 10:36:52 AM EST
[ Parent ]
Interesting comment. I have been wondering how this crisis will affect Yushenko especially after his governments corruption scandals, his reprivatisation problem, his falling out with an ally (Timoshenko) and questions over his sons lifestyle.
I guess initially his strong response may be popular but if prices rise as may be inevitable he may face electoral defeat as the corruption allegations continue.
by observer393 on Tue Jan 3rd, 2006 at 01:04:32 AM EST
[ Parent ]
.
No need for in-depth analysis and stacks of references, you single line comment covers the issue ever since George met Vladimir and touched his soul! LOL
    Hmmmm, this sounds very much in line with what our corporate government here is doing, gouging!!!

Vladimir from the good-old KGB school, doesn't have a single wrinkle in his face out of place. Off camera he must laugh his ass off when he fooled the bunch of diplomats, press and media once again. Putin is returning all gas and oil assets to centralized government within the Kremlin. Taking back from the rich and returning to the poor old party leaders.

The pricing issue of gas transport through the Ukraine is payback for Orange Revolt, support for the Russian Eastern Ukraine population and a stark warning to other satellite states. Dictator Karimov ultimately feels more comfortable under Russia's umbrella in Uzbekistan, and Putin looks for further consolidation of his reach and power in the Central Asian and Caspian Sea states.

Kremlin is not about PR or diplomacy, prefer to use available power to handle a crisis. The former Soviet satellite states recognize the tactics and offer countermeasures from the democratic West and public or media opinion.

Remember the photos of revolt?

Judiciary an Extension of the Executive?

No, no! Not Washington and Bush, in this article George Bush turns the table on friend Vladimir Putin.

The trial of oil billionaire Mikhail Khodorkovsky has evolved into a test watched globally, of the Kremlin's attitude towards an independent judiciary and private property.

Mr Bush said he had raised the matter with President Vladimir Putin at a recent meeting. Mr Bush said he told Mr Putin: "Here, you're innocent until proven guilty and it appeared to us, at least people in my administration, that it looked like he had been judged guilty prior to having a fair trial." He added: "We've expressed our concern about the appeal. We're watching the ongoing case."

The billionaire, whose wealth has shrunk since his arrest from $15.2bn (£8.4bn) to $2.2bn as the Kremlin seized and sold off his oil company Yukos, looked straight ahead while listening to the sentence.

He said in court: "This is a monument to Basmanny justice," a reference to the Moscow court that turned down his bail applications and to accusations that the courts are an extension of the executive.  

"Treason doth never prosper: what's the reason?
For if it prosper, none dare call it treason."

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'Sapere aude'

by Oui (Oui) on Mon Jan 2nd, 2006 at 09:35:29 AM EST
[ Parent ]
See also the discussion underway in the Breakfast thread:

http://www.eurotrib.com/story/2006/1/2/294/68796#6

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

by Jerome a Paris (etg@eurotrib.com) on Mon Jan 2nd, 2006 at 06:50:50 AM EST
.
Ukraine Stole 100 mln m³ of Natural Gas --
EU countries react to dispute and cut in gas delivery

"Treason doth never prosper: what's the reason?
For if it prosper, none dare call it treason."

▼ ▼ ▼ MY DIARY

'Sapere aude'

by Oui (Oui) on Mon Jan 2nd, 2006 at 10:06:12 AM EST
.
Natural Gas Dilemma in Ukraine

MOSCOW (Energy Bulletin) Nov. 8, 2005 -- The Russian gas monopoly "Gazprom" is considering raising prices for Ukraine three-fold to 170-180 dollars per 1000 cubic meters in contrast to the current price of 50 dollars per 1000 cubic meters. Turkmenistan is also considering raising the natural gas price for Ukraine.

Turkmenistan is discontented with the current level of payments and wants Kiyiv [Ukraine] to pay full price for imported gas. After the last visit of Ukrainian Prime Minister Jurij Jehanurov there were even rumours that Ashgabat, the biggest supplier of natural gas to Ukraine (50%), will stop gas supplies to Ukraine in 2006.

    "It is difficult to offer any proof but one gets the impression that Ukraine would keep dragging its feet until it fully explores two possibilities and makes up its mind about either or both:
    (1) Prospects of laying a pipeline between Iran and Ukraine and buying most of its gas requirements from Iran, and
    (2) Wait and see whether the United States can revive the long-shelved Trans-Caspian pipeline that would run parallel to the BTC."


Turkmenistan has an opportunity to feed South Asia's growing gas demand: reserves are huge but these await certification; Turkmenistan's Karakum Desert is rich with gas fields that lie beneath the sand.

The simultaneous price hikes by Russia and Ashgabat allow us to conclude that their actions are fully or partly coordinated. The situation is aggravated by a bilateral agreement between Gazprom and Uzbekistan signed in late September about the use of the transit capacities of Uzbek gas pipelines (50 billion m3 of natural gas per year). The agreement means that Ukraine is fully cut off from the Turkmenistan natural gas supply. Gazprom and the Kremlin can celebrate their triumph over Ukraine.

Gazprom Agreement Azerbaijan - 2004
Caspian Sea Region: USAID report 2002-2004 (pdf file)

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For if it prosper, none dare call it treason."

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by Oui (Oui) on Mon Jan 2nd, 2006 at 11:35:00 AM EST
Here is a graph of the effect of the cut on gas entering Hungary on the pipeline:

The reduction stabilised at 33%. However, due to mild weather, there are no problems as yet.

*Lunatic*, n.
One whose delusions are out of fashion.

by DoDo on Mon Jan 2nd, 2006 at 03:30:03 PM EST
That pipeline, from the number, represents slightly above 10% of Russian exports to Western Europe. We'd need to know how many of the lines they have cut...

GDF apparently says that they are currently losing 20% of their Russian supplies, which represents 4% of their total supplies.

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

by Jerome a Paris (etg@eurotrib.com) on Mon Jan 2nd, 2006 at 03:33:36 PM EST
[ Parent ]
The article this graph was in talks about cuts at a similar rate across the network - i.e., countries cut their own usage share by the same amount, thus what exits a transit country falls by the same amount. The article also mentions another pipeline that comes in via Austria, also supplied by Russian gas (but presumably via Slovenia), which experienced a similar drop but time-delayed. Here is the graph for the second pipeline:

Here is a combined graph for all four feed-in types in Hungary - the red is the Ukrainian line, the yellow ther Austrian, green is what comes from underground storage facilities, blue is own production.



*Lunatic*, n.
One whose delusions are out of fashion.

by DoDo on Mon Jan 2nd, 2006 at 04:19:29 PM EST
[ Parent ]
(but presumably via Slovenia)

I meant Slovakia...

*Lunatic*, n.
One whose delusions are out of fashion.

by DoDo on Mon Jan 2nd, 2006 at 04:21:00 PM EST
[ Parent ]
A lot of fun was made of Bush when he embarrassed himself by confusing Slovakia and Slovenia while talking to a visiting Slovenian dignatary. In Dubya's and DoDo's defence, though, I recently realized that this is a very understandable mistake, being as though Slovakia is called Slovensko in Slovak (Slovenia being Slovinsko).

A society committed to the notion that government is always bad will have bad government. And it doesn't have to be that way. — Paul Krugman
by Migeru (migeru at eurotrib dot com) on Mon Jan 2nd, 2006 at 04:24:14 PM EST
[ Parent ]
To further complicate things, 'Slovensko' in Slowenian means, you guessed it, 'Slowenian'. (They call their own country Repúblika Slovénija, and the other country Slovaška.)

To separate myself from Dubya (eek!!!), I doubt he knew any of this before.

*Lunatic*, n.
One whose delusions are out of fashion.

by DoDo on Mon Jan 2nd, 2006 at 04:34:37 PM EST
[ Parent ]
.
Russia Will Send Extra 95mln m³ a Day to End Shortage

France, Italy, Germany, Hungary and Poland were among those reporting falling volumes.  


Hungary says normal gas supplies
have now been restored

Russia says it will pump more gas to Europe after various countries said their supplies had fallen by up to 40% after Moscow cut Ukraine's provision.

Russia said it was sending an extra 95 million cubic metres a day, to make up for gas "stolen" by Ukraine.

Ukraine denies it has siphoned off $25m (£15m) worth of gas from a pipeline crossing its territory after Russia cut off its supply in a price dispute.

My diary @BooMan's ::
Russia Vows to End Gas Shortage to Europe

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For if it prosper, none dare call it treason."

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by Oui (Oui) on Mon Jan 2nd, 2006 at 07:14:53 PM EST
.
No, not in Moscow or in Kiev, these states are known for their chilled comments and ditto living circumstances. The temperature is rising on the European Tribune debate of the issue with some excellent contribution all around!

Especially after skitalets from the Russian Federation joined the debate ::

Russian gas cuts - why there is no need to worry

Jerome,
I've been lurking at DailyKos for the past 1.5 years and never posted a comment there.  I've been lurking here at Eurotrib since its inception as well.  This diary, however, has finally forced me to post a response ...

According to your point of view, Putin is trying to punish Ukraine for leaning closer to the West.  Specifically, you seem to be saying that he is retaliating in response to the Orange "revolution" - which was an American-sponsored coup, by the way, which has done nothing but harm the Ukrainian economy and people.  We can put this aside, however, because it has nothing to do with the current "crisis".

The real reason for Putin demanding that Ukraine pay market price for Russia's natural gas is that the Russian people are sick and tired of subsidizing countries that continually bad-mouth her in public, yet are more than happy to buy her gas for $50/ 1000 cm and resell it to Hungary, Romania, and Moldavia for $250.  Why should Russia subsidize Ukrainian industries and companies, like steel maker Kryvorizhstal, that are in direct competition with Russian industry?

[Minor edits and links added - Oui]


BBC News June 14, 2004 -- A company owned by the son-in-law of Ukraine's President Leonid Kuchma has won a tender to buy Kryvorizhstal, the country's biggest steel plant. Viktor Pinchuk, who has interests in steel, energy and media, won the bid in partnership with Rinat Akhmetov, Ukraine's richest man. Their 4.3bn-hryvnia (£430m; $780m) bid won despite competition from Russian, US and European steel firms. The tender has aroused vigorous protest in Ukraine and abroad.  

Analysis of Orange Revolt

"Treason doth never prosper: what's the reason?
For if it prosper, none dare call it treason."

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by Oui (Oui) on Tue Jan 3rd, 2006 at 05:36:53 AM EST
.
Excellent insight provided by Bloomberg article ::

Gazprom to Cover European Exports 'Stolen by Ukraine'
Gazprom Deputy Chief Executive Alexander Medvedev said at the press conference: "... gas supplies to Europe will be restored in full, in accordance to their contract. However, the situation in which Ukraine continues to steal gas and we continue to supply European customers can't continue indefinitely."

Turkmen Gas

Gazprom will buy 30 billion m³ of Turkmen gas this year, including 15 billion m³ in the first quarter, which means there is no room for Ukrainian gas in Turkmenistan's pipelines, the company said in an e-mailed statement yesterday.

Turkmen President Saparmurat Niyazov confirmed his country will sell Ukraine 40 billion m³ this year, according to a statement on Ukrainian President Viktor Yushchenko's Web site, following a telephone conversation between the leaders.

  «« click on pic to enlarge

BBC Video Report - Deputy Chairman of Gazprom
WTO official Pascal Lami --
Russia and Ukraine should pay market prices

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For if it prosper, none dare call it treason."

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'Sapere aude'

by Oui (Oui) on Tue Jan 3rd, 2006 at 08:12:33 AM EST
.
After expressing concern yesterday, the EU Commission said it would not engage in the contract discussion between partner states Russia and the Ukraine.


European press today

Tomorrow, a meeting has been set for the EU Energy Commission with all EU officials. Representatives from Russia, Ukraine and Gazprom will also attend the meeting.

European Commission Press Info

The European Union is pursuing a carefully neutral line in the spat over gas prices between Russia and Ukraine, refusing to blame either party. An emergency meeting of energy officials is set for 4 January, but the EU insists there is no supply crisis.

Brussels (RFE/RL) Jan. 3 -- The Russian-Ukrainian crisis has brought several responses from the European Union.

The European Commission today urged Russia and Ukraine to return to the negotatiating table in their dispute over gas prices. This came just hours before Russian and Ukrainian gas officials were reportedly due to meet later in the day to discuss their pricing dispute, which led Moscow to cut gas supplies to Ukraine.

Also in response to the crisis, the European Commission has called an emergency meeting of EU energy experts and industry representatives in Brussels on 4 January to assess the impact of the spat.

Russia's attempt on 1 January to cut gas deliveries to Ukraine led to considerable drops in gas supplies across Europe that depend on the same pipelines. Although it accuses Ukraine of siphoning off gas, Russia has now restored gas levels in Ukrainian pipelines to nearly precrisis levels.

European Commission spokesman Johannes Laitenberger said further talks between Moscow and Kyiv are the best way of overcoming the crisis. "At this point in time the commission urges the parties to the dispute to get back to the table of negotiations," he said. "The best possible solution would of course be for the parties to the dispute to solve the conflict between themselves. If that proved not to be possible, nothing is ruled out, nothing is ruled in [in terms of EU reaction]."  

"Treason doth never prosper: what's the reason?
For if it prosper, none dare call it treason."

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by Oui (Oui) on Tue Jan 3rd, 2006 at 03:13:51 PM EST
.
Russia, Ukraine Settle Gas Dispute in New 5 Year Deal

MOSCOW (Reuters) - Russia and Ukraine reached a face-saving deal on Wednesday in a bitter gas dispute which hit supplies to Europe for two days and cast doubt on Moscow's reliability as a secure supply source.

"We have reached a final agreement," Gazprom Chief Executive Alexei Miller told a news conference in Moscow after crisis talks with Ukrainian officials.

"This agreement will ensure stable supplies to Europe."

Details were sketchy, but Miller said the five-year deal was effective from January 1 and based on a price of $230 per 1,000 cubic meters of gas. That is a huge rise from the $50 Ukraine had been paying -- a holdover from subsidized Soviet-era prices.

But the head of Ukraine's Naftogaz state energy firm, Oleksiy Ivchenko, told the same news conference that -- after mixing in supplies from Turkmenistan and Kazakhstan -- Kiev would actually pay $95 per 1,000 cubic meters at its border.

Analysis - read on ...


Gazprom Cuts Gas Supplies to Ukraine ¶
Hungary-Poland Gas Disrupted ¶ Pipeline & Ecology

Fri Dec 30th, 2005 at 08:00:14 AM PST

"Treason doth never prosper: what's the reason?
For if it prosper, none dare call it treason."
 

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'Sapere aude'

by Oui (Oui) on Wed Jan 4th, 2006 at 04:34:01 AM EST


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