[abbeboeuf]

While it seems obvious that Ukraine has to expect to pay market rate - whatever that is - and conversely that Russia should expect to pay market rate for pipeline use, is there not a more profound reason for the inability to reach an agreement. Is Russsia laying groundwork for a new Georgian moment given the weakness of the West. The Russians seem at worst to stand to induce the EU countries to subsidize the Ukrainian payment while making their dominance in the area clear. They have to expect to increase the revenues at a minimum, possibly with an increase in perceived power. Looks win/win for Russia.

[Starvid]

If you want to read a clear cold analysis of what is actually happening, written by a guy with industry experience who wrote his PhD partly on the gas conflicts between Russia and the Ukraine, read this.

Excerpts:

As we enter yet another episode of worried or sanctimonious articles about the gas conflict between Russia and Ukraine, it's worth remembering a few simple facts:

1) The conflict started in 1992, not in 2006
2) Russia cannot win a gas war against Ukraine and knows it
3) the real underlying stakes are not about Russia or Ukraine

[...]

The hard fact is that Russia cannot cut off Ukraine for any period of time, because that endangers its exports (Kiev has always retaliated by siphoning exports), and Gazprom knows it perfectly well. The other hard fact is that, in practice, giving roughly 20% of its gas shipments to Ukraine as payment for transit (over an average of more than 1,000km) is a acceptable transaction for both sides. Of course, when prices for gas go up, as in recent years, the temptation to change the balance of the trade is tempting, but Russia simply has no practical way to do so.

If that is the case, why on earth do Russia plays this charade every year - especially now that critical Western eyes are firmly locked on the issue?

I have a simple theory: it's all a distraction from what's really at stake.

[...]

Of course, only gas coming from Russia could be delivered, and it still needed to use Ukraine's gas infrastructure, so the active cooperation of Gazprom, Russian and Ukrainian senior people was required to put that Trade in place (you can't move 30 billion cubic meters of gas per year without the approval of senior management, and cover from senior politicians) - but the very real money generated did not need to go either to Kiev or to Moscow. Thus the top people that enable that Trade are able to personally benefit massively from it - and effectively cut out both Kiev and Gazprom.

[...]

They are happy to play power politics with the West's worries as this goes down well with their own domestic audiences, but fundamentally they will not rock the gas boat.

Not, what is a lot more worrisome is that governments in Ukraine and Russia can tolerate - and indeed encourage - such blatant breaches of their authority and such large scale theft of what are effectively public resources. That the highest levels of government in both countries, and major bits of their infrastructure can be instrumentalised in what are disputes between unknown oligarchs only show how little rule of law and accountability there is in these countries, and how powerless Putin really is when dealing with competing power factions.

[wisconsin_cur]

For reference:

[Tanada]

For reference:

Interesting, six pipelines through Ukraine and only one originating through Beylorus!

[bratticus]

Putin Orders Cut in Gas Sent Via Ukraine as Disruptions Spread

By Philip P. Pan
Washington Post Foreign Service
Tuesday, January 6, 2009; Page A08

MOSCOW, Jan. 5 -- Russia said Monday that it is sharply reducing the amount of natural gas it ships to Europe through Ukraine, deepening its fuel embargo of the former Soviet republic as supply disruptions spread to other countries and a top Ukrainian official warned of "catastrophe" for the pipeline system that delivers a fifth of the continent's gas.

... He said the reduction in shipments could cause pressure in the pipelines to fall and trigger a shutdown as soon as next week. ...

[GoghGoner]

Well, I think this is the end of day five. Russia has further reduced gas flow through Ukraine.

The Russian announcement was, in essence, a partial Russian fuel embargo of Europe, something policy makers in Western capitals have feared for some time as relations with Moscow bottomed out last summer following the war in Georgia.

NY Times

[Pretorian]

reposting

"For those who have absolutely no idea about NG and its transit but like to talk about it:

One needs gas to shovel gas down the pipe. To transit 300 mln m of "EU's" NG, which Russia illegally shovels into Ukrainian pipe system, 21 mln m of gas are necessary. Now, Ukraine can pump up to 100 mln m per day of its own reserves. At 1 of January, Ukraine used 12 mln of incoming gas and 9 million m of its own, to pump it through. At 2nd of January, 10 mln of incoming and 11 million m of its own. That is possible because nobody works in Ukraine till 10th or 11th of January. Once people will go to work, all 100 mln will be required and either Gazprom will provide technological gas for free or EU will have shortages.

Imagine me leaving a 700 lbs [s]antique armoir [/s]life support system on your front porch with a note that its for your quadraplegic cousin who lives 500 miles down the road. What are you going to do? ""

[Starvid]

The Russians will fold, make up some deal which just doesn't make sense (remember the Turkmen gas last time? LOL) to save face, and then some Russian and Ukrainian oligarks will make money like bandits. Just like always.

[bratticus]

The Russians will fold, make up some deal which just doesn't make sense (remember the Turkmen gas last time? LOL) to save face, and then some Russian and Ukrainian oligarks will make money like bandits. Just like always.

Well they better hurry up and fold (not that I think they are going to this time--things are different now.)

Russian Dispute With Ukraine Worsens, Hitting Europe

By Daryna Krasnolutska and Rachel Graham
Bloomberg
Jan 06, 2009

Jan. 6 (Bloomberg) -- Russia’s natural gas dispute with Ukraine worsened, shutting off fuel shipments to Europe for the first time in three years and driving energy prices higher.

... skip ...

E.ON Ruhrgas AG, the natural gas unit of Germany’s biggest utility, said it would experience “significant” cuts in gas deliveries, with Russian supplies piped through Ukraine forecast to fall to zero at the Waidhaus gas transit point on the German- Czech border in the course of the day.

... skip ...

There were “no warnings” from the Russian side on cutting deliveries, Dubina said at a press conference in Kiev. “They probably decided to stop deliveries to Europe via Ukraine completely.” He said Ukraine urged the EU to mediate in talks.

... snip ...

[bratticus]

very different this time

Belarus ruble sinks 20 percent, shocking citizens
The Associated Press
Jan 6, 2009

MINSK, Belarus (AP) — Belarus' central bank sharply devalued the Belarusian ruble Friday, allowing the currency to plunge 20 percent to help stop the hemorrhaging of its reserves. The move came as an unwelcome shock to ordinary citizens.

The National Bank said the devaluation was aimed at raising the competitiveness of the Belarusian economy, which has been battered by the global financial crisis. It also was a condition of a $2.5 billion loan from the IMF announced Wednesday.

... snip ...

[Nickel]

Sorry to enlighten you guys, but without Ukraine there'll be no gas for anybody. Not even for Russia, which will have to burn it since it couldnt develop any kind of storage device .

It's called "in the ground", dimwit. It's where it's been for millions of years.

[bratticus]

Do you think there's no connection between the IMF forcing the ruble devaluation and the gas being cut off?

[Nickel]

If Ukraine continues to steal the EU's gas, that is going to put more pressure on the EU to import gas via other routes like Belarus, the Black sea or the Baltic sea. Or to speed developments of the EU's shale gas resources. Good for the EU, bad for the Ukraine.

Especially if Ukraine ever hopes to accede to the EU, never mind NATO.

[Starvid]

Do you think there's no connection between the IMF forcing the ruble devaluation and the gas being cut off?

It's the Belarussian ruble, which I guess is fixed to a currency basket?

The Russian ruble floats. They are two different currencies. Belarus is a shitty little country no one cares about. During the Cold war people always joked that Minsk was the place to be during nuclear Armageddon, as everything always happened 10 years late in Minsk.

The Russians will fold when they are at risk of breaking their commercial contracts with the Western European customers. I'm not sure what they look like, but an educated guess is that the gas pressure might fall a certain amount for a certain time without the contract being broken.

Remember, this is not the first time we see them do this merry dance, nor was 2006 the first time. They have done it time after time after time since 1992, and there are lots of complicated details (which mainly have to do with the fact the the Soviet gas industry was born in the Western Ukraine in the 20's).

But, things have always ended the same way and that's bound to happen again. Nothing's different this time compared to the other times. Indeed, things were much more chaotic and confused during the 90's.

If you want to understand the quite complex dynamics which are in play here, read the article written by the guy who spent half a year at Gas de France in Kiev.

[Pretorian]

Sorry to enlighten you guys, but without Ukraine there'll be no gas for anybody. Not even for Russia, which will have to burn it since it couldnt develop any kind of storage device .

It's called "in the ground", dimwit. It's where it's been for millions of years.

I am always fascinated by piplz who like to talk about things they have no slightest idea about. Its really something. Doesn't matter who talks about what-- but I have to add something too.
There is no such thing as "in the ground " in Russia, Your Ignorance . Conservation and reconservation of gas fields will cost much more than burning it all.

[bratticus]

Do you think there's no connection between the IMF forcing the ruble devaluation and the gas being cut off?

It's the Belarussian ruble, which I guess is fixed to a currency basket?

The Russian ruble floats.

Wikipedia still reports that it's using a gold standard...

Russia Ruble (Wikipedia)
The Soviet ruble of 1961 was formally equal to 0.987412 gram of gold ... The ruble was redenominated on January 1, 1998, with one new ruble equalling 1000 old rubles.

... but that doesn't hold up well.

Russian ruble falls to fresh multi-year low against dollar

RTTNews
December 30, 2008

... skip ...

Russia's Finance Minister Alexei Kudrin announced over the weekend that the resource-rich nation expects to post its first budget deficit in a decade next year. Reports indicated that Bank Rossii let the ruble drop 1.7 percent against its basket of 55 percent dollars and 45 percent euros, devaluing the currency for the twelfth time in less than two months.

... snip ...

Plus "twelve devaluations in less than two months", why?

[bratticus]

The last time gas was cut it lasted from Jan 1, 2006 to Jan 4, 2006.

Now it's Jan 1, 2008 to ongoing (sixth day so far.)

[bratticus]

Russia's running out of time to back down.

Gas crisis grips central-eastern Europe amid arctic freeze

EUBusiness
January 6, 2009

(VIENNA) - Several European countries were in crisis mode Tuesday after their imports of Russian gas were cut sharply, with Bulgaria resorting to rationing supplies to industry amid arctic winter temperatures.

... skip ...

And Slovakia, which is 98-percent dependent on Russia for natural gas, declared "a state of energy emergency" after Russian gas supplies to the country fell by 70 percent overnight.

... skip ...

In Croatia, which receives its Russian natural gas through pipelines from Austria, officials said deliveries had ceased completely.

... skip ...

Further southeast in Macedonia, Economy Minister Fatmir Besimi told AFP that "the delivery of gas to Macedonia has stopped."

... snip ...

[bratticus]

Nuke to re-open as starvidian Russian backdown nowhere in sight.

Ukraine gas official: talks to resume

By MARIA DANILOVA
Associated Press
January 6, 2009

KIEV, Ukraine (AP) — Ukraine and Russia will hold new talks to end their bitter natural gas dispute that has cut off Russian gas to six other countries, the head of Ukraine's gas company said Tuesday, as officials in eastern Europe warned of a looming emergency.

Bulgaria, which gets almost all its gas from Russia, said it would seek the reopening of a nuclear power facility as two cities were left without gas.

... skip ...

Romania's gas transport company Transgaz said Ukraine ceased pumping gas at 3 a.m. (GMT 0100) Tuesday.

Turkey's Energy Minister Hilmi Guler confirmed the cutoff and said the country was trying to compensate with supplies from other sources including another Russian pipeline beneath the Black Sea.

The Czech Republic and Hungary reported partial supply drops. The Czech gas company RWE Transgas said it expects to get only 25 percent of the gas it was supposed to get Tuesday, while Hungary predicted its cut would be greater than the 20 percent it saw the day before.

... skip ...

[bratticus]

Russian Natural Gas Supply to Europe Dwindles

By Philip P. Pan
Washington Post Foreign Service
Tuesday, January 6, 2009; 10:11 AM EDT

MOSCOW, Jan. 6 -- The flow of Russian natural gas to Europe dropped sharply Tuesday with six countries reporting a complete halt of shipments as Russia deepened its gas embargo of neighboring Ukraine.

Countries as far away as Italy and Germany warned of disruptions and the European Union called the sudden fuel cut-off to member countries "completely unacceptable."

Bulgaria said it was in a "crisis situation" and was preparing to restart two nuclear reactors, while Croatia said it was reducing supplies to industrial customers. Austria and Romania reported deliveries had fallen by as much as 90 percent, the Reuters news service reported, while German officials warned that heating needs during the current cold weather could lead to supply shortages if the Russian embargo continues. Turkey also reported reductions in Russian gas coming via Ukraine, as have Greece, Macedonia, Serbia, Poland and Hungary.

... snip ...