Russia to Cut Off Natural Gas Pipeline to Ukraine

Russia is preparing to shut off supplies of natural gas to the Ukraine over pricing disputes. The disruption could also affect Western Europe as it gets a large amount of Russian gas from pipelines running through the Ukraine:



This could really be disasterous for the Ukraine and the rest of Europe. I bet this is some kind of payback after the Ukrainian "orange revolution."

Related Thread:
POLITICS: Senior Kremlin Official Resigns, Criticizes Putin

They shut it off today.
It's said most of western europe won't see supply shortages but the threat of prices going higher is likely

"If Gazprom shuts down supplies to Ukraine for more than four days, the pipeline could lose pressure that will take weeks to rebuild,'' Weafer said in a Dec. 30 interview. "The longer it goes on, the more likely it is gas prices in Europe will surge on concerns about supply disruptions.''

EO.N, Gaz de France Don't See Disruption From Ukraine Gas Row

Well it looks like it has not taken to long to effect some EU countries and perhaps the Ukrainians are taking some of the gas as payment for gas that is in the pipeline destined to other countries.

news.bbc.co.uk...

EU nations have started to feel the impact of Russia's axeing of gas supplies to Ukraine, as Moscow accused Kiev of stealing EU supplies.
Hungary and Poland were the first EU states to have supplies disrupted.

[...]


Ukraine's prime minister has said his country has the right to take 15% of the remaining supplies in the pipelines as payment for transporting the gas to Western Europe.

Europe was going to have tight supplies of natural gas this winter no matter what happened but now they can blame Moscow for all their troubles.

I hope people start to realise just how bad the energy situation is and that those with resources are in the driver's seat and those who import are in serious trouble.

The energy wars are upon us.
.

Russia is simply saying that the Ukrainians will have to face the consequences of their freely chosen political moves away from Russia and towards 'the west'.

Namely a loss of their previous heavily discounted 'client state' status and one where they pay the same prices as the rest of the international markets.
The Ukraine can have all the gas they want but no longer at the hugely reduced rate (around one quarter of market prices apparently).

Why shouldn't the Russians do this?

Is anyone else finding the USA's stance on this (where for some reason they seem to be agreeing with the Ukrainians that the energy cost rises should be phased in over an undetermined period of time - coooo wouldn't you love to see that kind of 'treatment' here at home for the rest of us in our domestic markets, yeah right ) bizarre, to say the least?

There is no reason why this should affect Europe at all (Russia is saying they will even make up the gas it is alleged the Ukrainians have stolen)......but no doubt the absurdly volatile and hysterical energy markets will use this as yet another excuse to gouge customers even more.

Norway is already producing gas at max, so they can´t deliver any more gas to Europe to help out against the shortages. Ukraine needs gas to survive, it´s very cold there now. Ukraine say they want to pay market price for the russian gas but russia wanted 5 times the price which Ukraine found unacceptable. Russia claims Ukraine is now stealing gas intended for Europe and that is probably the case as well. But Ukraine is desperate and they don´t have much choice I guess. What would you do if you were in their situation?

As a sidenote, Russia also recently banned all import of fish from Norway. The ban is still in effect. The reason for this is probably an ongoing "war of fishery rights" between Norway and Russia. An incident involving the russian fishing boat Elektron made them seek "revenge". The Norwegian fish is fine but the Russians claim it´s "not healthy". Only the Russians have come to this conclusion though. Others (like Singapore) have found the Norwegian fish to be in perfect condition.

Originally posted by Hellmutt
Ukraine needs gas to survive, it´s very cold there now.

- Actually right now the Ukraine reckons they have enough gas in their reserves to sit this out a while.

Ukraine say they want to pay market price for the russian gas

- Er, no they don't.

They think they should move from the privileged subsidised price they were paying (which was around one quarter the market rate) to the proper market price in a phased series of rises instead of one jump.

but russia wanted 5 times the price which Ukraine found unacceptable.

- No, that is simply not true.
Russia wants the Ukraine to pay the same international market prices that Europe pays.
They were paying a quarter of that rate so the truth is that Russia wants to increase the price from the current hugely discounted $55 - $57.5 per 1000 cubic metres to $220 - $230.

If the Ukrainians want to turn ever 'westward' politically that is their right and they are free to do so but why on earth should Russia continue to provide them with such a 'soft price' for their gas?

Ukraine has insisted that Russian proposals - which would see the cost of importing Russian gas quadruple to between $220 and $230 per 1,000 cubic metres - are unacceptable.

Ukraine says it is happy to pay market rates, but wants price increases to be phased in gradually over several years.

news.bbc.co.uk...

Russia claims Ukraine is now stealing gas intended for Europe and that is probably the case as well.

- It would appear so, Russia has said today that they will increase supply to make up the short-fall.

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

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

news.bbc.co.uk...

But Ukraine is desperate and they don´t have much choice I guess.

- Yes they did.
They could have tried to reach agreement with the Russians a damn sight harder than they did and without threats to simply take 15% of what was piped across their territory.

Gazprom has dismissed a claim by Ukraine that it is legally entitled to take 15% of Russian gas which is piped across Ukraine on route for western Europe.

news.bbc.co.uk...

They could have gone to international arbitration (as they once claimed they would) long ago rather than indulge in this obvious 'brinkmanship' and transparent attempt to get the international community (particularly the European part of that community) to put pressure on Russia on their behalf.

Ukraine has warned Russia that it may seek international arbitration over their worsening row over gas prices......

......Since the 1970s, the Stockholm Institute has become an established body for settling commercial disputes between countries of the former Soviet Union and other nations.

Both Russia and the Ukraine are signatories to the 1958 Convention on the Recognition and Enforcement of Foreign Arbitral Awards, so any would-be decision by the Institute in the case would be legally binding.

news.bbc.co.uk...

IMO it is absolutely no coincidence that this has been manufactured in this way and is happening as Russia takes 'chairmanship' of the G8.

What would you do if you were in their situation?

- Stop this futile and damaging attempt at politicing and trying to have it both ways?

If the Ukraine no longer wish to be so closely allied to Russia (as is their free and democratic right......which they have exercised) then that is fine but surely they should not expect the old 'client state' benefits that they once had?

Like everyone else they can face the 'free market' and make the best of it.

Why should they expect any special treatment?

......and how come certain right-wing political elements within those countries that claim to champion the supposed sense and superiority of 'the market' are happy to bash Russia over this?



[edit on 2-1-2006 by sminkeypinkey]

Just wonder what's the gas price in other countries?

Originally posted by sminkeypinkey

Why should they expect any special treatment?

You´re right. I didn´t do my homework this time. Actually I just came back from holiday (= no internet for two weeks - heh)

It's Russia's gas and they can sell it at whatever price the market will bare. What is that price for Ukraine remains to be seen.

Just one note though, unlike oil which can be transported all over the world, natural gas is still operates as a largely localized market. It needs to move through pipelines unless we are talking about LNG which is a very small percentage of the market. So there is no "world price" for NG like there is for oil.

Any capitalist free market supporter is being a hypocrite if they bash Russia over this IMO. Or does this cross over into extortion by a monopoly?

For those who are interested there are two very good threads with lots of info on this situation over at The Oil Drum:

Our first problem of the year is an energy one and
The Russian-Ukrainian situation continues
.

It would appear everything is calming down, the matter is now settled and everybody has gotten something for the obligatory face-saving.

Rumours of this being the start to what some seem to insist are the supposedly coming' energy wars' would appear to be much exaggerated!

Russia and Ukraine have settled a row over gas prices which disrupted supplies to several European countries.
Under the five-year deal, Ukraine will buy Russian and Central Asian gas for $95 per 1,000 cubic metres on average.......

......Gazprom will sell Russian gas to Rosukrenergo for $230 for 1,000 cubic metres from 1 January, but the company will also supply Ukraine with much cheaper gas from Turkmenistan.

The overall price Ukraine will pay will be $95 per 1,000 cubic metres. It will also get paid 47% more for transporting Russian gas to Europe.

Previously, Ukraine bought gas from both Turkmenistan and Russia at a price of $50 per 1,000 cubic metres.

news.bbc.co.uk...

Thanks for the informative posts Pinkey. I would add but it seems you have this one well in hand! "Freedom" might have a higher price than they expected it seems. It is however strange that Russia waited so long and especially so considering that the Ukrain has reserves while Europe did not. Did the Russians intend this as a warning to Europe and not actually at the Ukrain?

Stellar

Originally posted by StellarX
Did the Russians intend this as a warning to Europe and not actually at the Ukrain?

- Interesting angle.

But personally I doubt it though.

Firstly because the obvious differences between Russia and the Ukraine are real and have been simmering for some time and secondly because Europe is at a point where future energy strategies are being developed right now and this would be spectatcularly stupid and badly timed if the Russians were attempting to manipulate things to their advantage.

If Europe is to take any sort of 'warning' from this it is one that will move European policy in a direction which would not be to Russia's selfish advantage.

If you want a conspiracy angle on this how about one where we can say that Russia has just moved in a way that might start to shift European public opinion and that it is possibly to help promote a new round nuclear power stations all across Europe when previously there was absolutely no public appetite for such things?

Originally posted by sminkeypinkey
Firstly because the obvious differences between Russia and the Ukraine are real and have been simmering for some time and secondly because Europe is at a point where future energy strategies are being developed right now and this would be spectatcularly stupid and badly timed if the Russians were attempting to manipulate things to their advantage.

As far as i can tell Europe has real and growing energy problems and i do not think that shots accross the bow from Russia will be able to force the Europeans out of the dependence on Gas and oil anymore than all the problems in the ME so far has...

If Europe is to take any sort of 'warning' from this it is one that will move European policy in a direction which would not be to Russia's selfish advantage.

Ideally yes but wich government will risk the added cost of such transition? I think the Russians hid this one very well and made their point clear without the public probably realising anything other than just how important Russia still is.

If you want a conspiracy angle on this

I'm not bored and i dont spend time trying to come up with conspiracies....

how about one where we can say that Russia has just moved in a way that might start to shift European public opinion and that it is possibly to help promote a new round nuclear power stations all across Europe when previously there was absolutely no public appetite for such things?

Nuclear power is safer but rather more expensive if not backed by a comprehensive government policy like France implemented in the 70's. Nuclear fuels are not exactly easy to come by either so it just changes the form of energy manipulation imo.

Stellar

[edit on 8-1-2006 by StellarX]

Originally posted by StellarX
As far as i can tell Europe has real and growing energy problems

- Agreed, but then don't 'we' all?

i do not think that shots across the bow from Russia will be able to force the Europeans out of the dependence on Gas and oil anymore than all the problems in the ME so far has

- I hear what you are saying but that just seems to me to be tipping the argument back to the old idea that was current after the 70's oil crisis where the seller has all the power in the relationship.
They don't.
They need their buyers (and their buyers money) just as much as we need the product.

......and besides I am far from convinced this was anything like a 'shot across the bows' and certainly not one pointed at Europe.

but wich government will risk the added cost of such transition?

- But that is my point; several countries are, right now, formulating new policies.
In the UK we are likely to have an almighty row over commissioning some new nuclear reactors, I don't expect us to be alone in that.

I think the Russians hid this one very well and made their point clear without the public probably realising anything other than just how important Russia still is.

- I wouldn't be so sure; 'we' have already seen large gas lines laid down between Russia and the west and there is at least one more enormous one to follow next year (IIRC).......which avoids the Ukraine completely ( ).

Originally posted by sminkeypinkey
Rumours of this being the start to what some seem to insist are the supposedly coming' energy wars' would appear to be much exaggerated!

No Confidence Vote - Ukranian Government Crisis

Ukraine's parliament has voted in favour of sacking the government over its recent gas deal with Russia.

Ukraine agreed to double its payments to Russia for gas after Moscow switched off its supplies for three days on 1 January demanding a four-fold hike.

Ukraine's former Prime Minister Yulia Tymoshenko has launched a legal challenge against the energy deal.

The no-confidence vote marks the second time in six months that a Ukrainian government has been sacked.

Easy pickings...

Here another person's analysis of the situation with echo's of the cold war: The Kremlin and the world energy war

Move along now, nothing to see here...


.

Originally posted by Gools
Ukraine's parliament has voted in favour of sacking the government over its recent gas deal with Russia.

- Well someone has to carry the can and do a little huff and puff over them losing their cushy 'feather-bedding' deal, huh?

Move along now, nothing to see here...

- I'm not saying there is nothing at all going on.

But I think if your example of an 'energy war trigger' is one state freely chosing to move (politically) away from another and then crying their eyes out as they lose their spectacularly cheap gas deal - but only to move, gradually, from that towards the same price the other 'western customers' are paying - then I think that is making way too much of it.
Sorry but I do.



[edit on 12-1-2006 by sminkeypinkey]

Originally posted by sminkeypinkey
- Agreed, but then don't 'we' all?

But Europe is more dependent on middile eastern oil than the US is so they have enough trouble's with those suppliers allready. Disruption from another major supplier will, as you say, obviously not help!

They don't.
They need their buyers (and their buyers money) just as much as we need the product.

And OPEC keeps saying that want the price of oil in the 30 dollar range so i am in full agreement with you. My point is basically that the major producers of oil has not been in control of the oil price for a long time. But i think we are mostly in agreement...

......and besides I am far from convinced this was anything like a 'shot across the bows' and certainly not one pointed at Europe.

Well that's why their called opinions. If i wanted to try convince you ( or imagined i could) i would be putting more on the table.

- But that is my point; several countries are, right now, formulating new policies.
In the UK we are likely to have an almighty row over commissioning some new nuclear reactors, I don't expect us to be alone in that.

The only thing that is apparently stronger than the oil lobbies are those that prevent refineries and new nuclear plants from being built. You can easily wait 3 or more years just for a "environmental impact study" by wich time all your funding has gone away anyways. The system is very much set up to prevent expansion of energy capacity and our governments are doing far more talking and "studying" than much anything practical.

- I wouldn't be so sure; 'we' have already seen large gas lines laid down between Russia and the west and there is at least one more enormous one to follow next year (IIRC).......which avoids the Ukraine completely (

).

Well they have Europe in a great short term position where Europe has allready invested heavily in these schemes and simply can not abandon them now. These games with Ukraine might simply serve as pretense to raise gas prices exactly as has happened to oil prices. That's how i see it at least.

Anyways!

Stellar

Well it seems i am at least as crazy ( or not) as Georgian President Saakashvili who is accusing Russia of manipulating gas prices.

Russia blamed for 'gas sabotage'

Gas explosion standoff continues between Russia and Georgia

Opinions?

Stellar

[edit on 23-1-2006 by StellarX]

Well so far I think the one element that looks 'iffy' is the damage to the supply lines (but it could have been anyone, there is no proof either way and it is still far from clear who was responsible for that).

Georgia IMO is in a similar boat to the Ukraine.

They have freely chosen to have less and less to do with Russia politically and are moving ever towards 'the west' (or what they imagine to be 'the west', along with a little outside encouragement, no doubt).

Then they get upset when Russia asks they move to a 'western price' for Russia's resources.

I cannot see why anyone thinks this is unusual; if you don't want to be in the 'Russian club' why would you expect any of the benefits that 'membership' once attracted?
If they were trying to charge twice what they charge Europe or something one might have a point but they are merely asking those countries that want to 'move away' from Russia to move to paying the same prices as Europe.

Also complicating this matter is the current unusual extremely cold snap Russia is experiencing.

This has led to Russia to look to Russia first and keep their supply priority up at home first.
But - contrary to what some seem to imagine - this is not the first time this happened and when the ultra cold spell was over supplies returned to normal.

Interesting how the focus of all of this has shifted from a terrible (deliberately? threatening?) Russian made 'European crisis' - a tale completely unsustainable in the light of the facts - to implying nasty old Russia is bullying those poor little countries (that have dared to 'stand up to them' or who 'want to be free' etc etc and all those other cliches), no?


[edit on 24-1-2006 by sminkeypinkey]