Saturday, January 3, 2009

Gas Wars of a Different Kind

Anyone following the Ukraine-Russian natural gas dispute should look at two articles on the BBC World News Webpage. EU states see gas pressure drop and Russian gas theories abound explain some of the current happenings and some of the theories behind the dispute.

The background…

Ukraine imports the vast majority of its gas supplies from Russia. Europe imports about 40% of its gas from Russia, half of which transits Ukraine via a network of pipelines.

Gazprom, the Russian state energy giant, says it was owed $2 billion by Ukraine for 2008 gas supplies, $1.5 billion for gas and $0.5 billion in late payment fines. Ukraine’s state energy company Naftogaz has paid $1.5 billion but will not pay the fines.
n 2008, Ukraine paid $179 per 1000 cubic meters, which Russia wants to raise to $250 for 2009. This is still far below the $400 to $500 that European countries pay. Ukraine has offered $235 and Gazprom says settle or it will be $418 like real people pay.

Why the debt, I do not understand, though Tanya says that the big factories are charged a huge price for gas to subsidize consumers and they do not pay or are not able to pay. Then there is Swiss registered RosUkrEnergo, the intermediary that buys all Ukrainian gas from Gazprom and sells it to Naftogaz. Why it exists, I do not know, but in 2006, Ukraine was not successful in negotiating a direct contract between Naftogaz and Gazprom. RosUkrEnergo is apparently owned by some seriously powerful dudes from Ukraine and Russia who like the opportunity to continue to make $billions.

So far, a relatively simple commercial dispute but the plot thickens…

Russia cuts off gas supplies to Ukraine on schedule as threatened but gas pressure in the pipelines drops to EU countries. Russia says Ukraine is stealing gas and can no longer be trusted as a transshipment route. Ukraine says Russia is not shipping enough to meet EU requirements and blaming Ukraine. This I believe is closer to the truth as Russia wants to build two very expensive very environmentally dangerous undersea pipelines through the Baltic and the Black Seas which Gazprom will control and which will bypass all unfriendly FSU countries like Poland and Ukraine. So making Ukraine look bad helps garner EU support for their pipelines.

At the same time, Russia would love to unseat Ukrainian President Yushchenko whom they hate. Ukrainian Prime Minister Yulia Timoshenko, of the plaited hair and boundless ambition, also hates Yushchenko and wants his job. Both sides have reason to make Yushchenko look bad.

Stay tuned and keep the home fires burning.


  1. I didn't read this post yet, so I have no idea if this comment is going to seem totally whacked out, but look at how handsome your new profile picture is!!! So much better than your three stooges look. Not as cute as the picture of you as a kid, but at least people get to see how well you turned out now.

  2. Also, so many "chenko's" in that story! PS. Mark says "hi" to you and Tanya. He got a big kick out of being in our Christmas letter, too.

    Also, wouldn't you much rather get unrelated comments on your blog than actual emails from me?? I thought so.

  3. Here's another unrelated comment. That's a great photo, Dad! Who took it?

  4. I didn't read the post either. I read the first line and then my eyes glazed over. Learning is for suckers.

    The pic is cute though, I approve!

  5. i didn't appreciated unscandalous canadian politics until being involved in others'. The badly quoted phrase 'the people have whatever government they deserve' always bothered me as i never saw Canadians as being more boring and other people, say a Russian as being dishonest and corrupted. never, but I sure see our politics that way.

  6. The Economist ran a story on it this week too.


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