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Page added on April 1, 2014
Russia Hikes Natural Gas Price For Ukraine
Russia on Tuesday sharply hiked the price for natural gas to Ukraine and threatened to reclaim billions previous discounts, raising the heat on its cash-strapped government, while Ukrainian police moved to disarm members of a radical nationalist group after a shooting spree in the capital.
Alexei Miller, the head of Russia’s state-controlled Gazprom natural gas giant, said Tuesday that the company has withdrawn December’s discount that put the price of gas at $268.50 per 1,000 cubic meters and set the price at $385.50 per 1,000 cubic meters for the second quarter.
The discount was part of a financial lifeline which Russian President Vladimir Putin offered to Ukraine’s President, Viktor Yanukovych, after his decision to ditch a pact with the European Union in favor of closer ties with Moscow. The move fueled three months of protests which led Yanukovych to flee to Russia in February.
Radical nationalist groups played a key role in Yanukovych’s ouster, but they quickly fell out with the new government. Many activists are still encamped on Kiev’s Independence Square, known as the Maidan, and have signaled their intent to remain there until the election of what they deem to be a legitimate government.
Last week, one of the leaders of the most prominent radical group, the Right Sector, was shot dead while resisting police.
Right Sector members then besieged parliament for several hours, breaking windows and demanding the resignation of Interior Minister Arsen Avakov. They lifted the blockade after lawmakers set up a panel to investigate the killing.
Late Monday, a Right Sector member shot and wounded three people outside a restaurant adjacent to Kiev’s main Independence Square, including a deputy city mayor, triggering a standoff that lasted overnight.
Police responded by surrounding the downtown Dnipro Hotel, which Right Sector had commandeered as its headquarters, demanding that the radicals lay down their weapons and leave. Avakov said that Right Sector members got into buses Tuesday morning leaving their weapons behind and headed to a suburban camp under the escort of officers of Ukraine’s Security Service.
The Ukrainian parliament then voted to order police to disarm all illegal armed units. Backers of the measure said the drive was needed to combat a recent surge in violent crime and to defuse the risk of provocations by “foreign citizens” in Kiev and the south and east of Ukraine, heavily Russian-speaking regions where anti-government groups have rallied over the past several weekends in calls for secession.
In March, authorities launched a broad appeal for the voluntary surrender of weapons, many of which went astray from police depots during months of unrest. The government has said a similar amnesty will remain in effect in April.
If police disarm nationalists and other radical groups, it would undermine Russia’s key argument: the allegation that the new Ukrainian government was kowtowing to nationalist radicals, who threaten Russian-speakers in southeastern Ukraine. Russia has pointed at the perceived threat from ultranationalists to defend its annexation of Crimea, and has concentrated tens of thousands of troops along its border with Ukraine, drawing Western fears of an invasion.
Putin and other officials have said that Russia has no intention of invading Ukraine. Defense Minister Sergei Shoigu insisted Tuesday that the Kremlin wants a “political settlement that would take into account interests and rights of the entire Ukrainian people” and had no intention to threaten Ukraine’s statehood.
At the same time, Russia has used financial levers to hit Ukraine that is teetering on the verge of bankruptcy. Gazprom’s Miller said that the decision to charge a higher price in the second quarter was made because Ukraine has failed to pay off its debt for past supplies, which now stands at $1.7 billion.
Preparing to further raise the heat on Kiev, the Russian parliament moved to annul agreements with Ukraine on Russia’s navy base in Crimea. In 2010, Ukraine extended the lease of Russia’s Black Sea Fleet’s base until 2042 for an annual rent of $98 million and price discounts for Russian natural gas supplies. The lower house voted to repeal the deal Monday, and the upper house was to follow suit Tuesday.
Russian Prime Minister Dmitry Medvedev has said that Russia had given Ukraine $11 billion in gas discounts in advance and should claim the money back once the lease deal is repealed – a threat repeated Tuesday by Deputy Foreign Minister Grigory Karasin.
The Russian moves would raise the toll on Ukrainian consumers, who have benefited from generous state subsidies that have kept gas prices low while swelling government debt.
Ukraine has agreed to gradually withdraw subsidies under a deal with the IMF that required the country to make its utility costs economically viable for the state by 2018 as condition for up to $18 billion in loans. Household gas prices in Ukraine are set to rise 50 percent beginning May 1.
Russia’s relations with the West have plunged to their lowest level since the Cold War, with the United States and the European Union slapping Moscow with sanctions over its annexation of Crimea.
Meanwhile, foreign ministers of Germany, Poland and France met in Weimar, Germany, to consult on the crisis in Ukraine ahead of a meeting with their NATO counterparts.
Germany’s foreign minister, Frank-Walter Steinmeier, renewed a push for internationally backed direct talks between Russia and Ukraine amid “small signals of de-escalation” in the launch of an international observer mission and Russia’s stated intention to pull a battalion from the Ukrainian border.
“What will be important in the coming days is getting Russia and Ukraine around a table together,” Steinmeier said in Weimar. He said that could be done in an international framework – “it can be a contact group, it can be a support group.”
19 Comments on "Russia Hikes Natural Gas Price For Ukraine"
Arthur on Tue, 1st Apr 2014 7:54 pm
Poor Ukrainians are going to regret dearly that they attempted to leave Moscow’s orbit, to be looted by western predators of the IMF variety. It used to be a country with very little ethnic tension, but now the Nuland gang hired a group of ultra-nationalists, a minority group, a group of useful idiots, that could be used to oust the legitimate democratically elected government of the Ukraine. Now it looks very difficult to get the old situation back. The Crimea is gone and the rest of the Russophiles could attempt to follow their example. The Nuland Rottweilers are trying to create as much conflict as possible and hope they can provoke Russia to cross the border to come to the aid of the Russophiles. And then it is Germany-invading-Poland again: cold war or worse.
The only solution: what Lavrov proposed… Ukraine as a sort of very poor Switzerland: confederation, ‘adopted’ by both Russia and EU.
Nony on Tue, 1st Apr 2014 7:56 pm
What’s to stop Ukraine from slapping tolls on all the gas that is going through their country?
DC on Tue, 1st Apr 2014 8:15 pm
Whats stopping them Nony, is Ukraine has zero authority to do any such thing.
george on Tue, 1st Apr 2014 8:32 pm
Ukraine has walked into an economic buzz saw.
Arthur on Tue, 1st Apr 2014 8:42 pm
What’s to stop Ukraine from slapping tolls on all the gas that is going through their country?
For starters this one:
http://en.wikipedia.org/wiki/Nord_Stream
… and South Stream is under construction, expected to be operational in 2018.
The Ukraine obviously already imposes tolls, secondly: any toll increase will increase the price the Europeans will have to pay.
rockman on Tue, 1st Apr 2014 8:48 pm
Actually the Ukrainians can stop all NG moving thru their country anytime they want. They own the pipelines: not the Russians or the EU. One Ukrainian company controls the entire system. And thus they can negotiate any contract price to transit that NG which is what they’ve done all this time. OTOH that existing transit fee is a big source of their national income. I’m not sure if the Russians or the EU has been paying the fee…maybe they split it. But anytime the Russians want to sell their NG to the EU at the Russian border it would be up to the EU to deal with any Ukrainian tariffs or “leakage” of the NG they’ve bought from Russia. As mentioned elsewhere this is how virtually every US NG producers does it: once the NG goes through my meter and leaves the lease I don’t care what happens to it: it doesn’t belong to me anymore…I get paid off my meter.
J-Gav on Tue, 1st Apr 2014 9:10 pm
Surprise, surprise!
There can be no clear ‘winner’ in this pitiful situation. Putin’s played it better (or at least more coherently from a Slavic point of view) than the West (from any point of view) so far, but there are trade-offs. Russia secures its Black Sea (and thus Mediterranean naval acces – a major strategic goal)! but must now deal with the demands for help and development from a Crimean population which could turn rowdy if they see nothing’s in it for them. And Russia is no position to do a hell of a lot for them economically at this point in time. Then there’s the 300,000 strong Tatar population demanding an autonomous region (within Crimea)! Etc.
The West, on the other hand, muffed its muddled attempt to shut Russia out of Crimea (vastly reducing Mediterranean access though not eliminating it as Russia does have another smaller base further east on the Black Sea) and generally close them in a little bit more in the region. The pincer movement (Baltics in the North, Ukraine, Chechnya, Georgia etc in the south) has hardly been a resounding success. The fallout for Europe in the short term isn’t likely to be positive. Things could smooth out a bit later though, when Germany (re)discovers that they live closer to Russia (and their resources) than to the U.S. Whether NATO goes ape-shit when that happens remains to be seen. Depends on just how prevalent the new cold-warriors are amongst Western elites.
Kenz300 on Tue, 1st Apr 2014 11:59 pm
Local energy production with local labor helps the economy and provides economic security.
There are many opportunities to produce energy locally. It takes a shift in attitude away from the old centralized energy model to a new local, distributed model. Reliance on the old model and the way it has been previously done is a loser for the economy and security. It will take a new attitude of self reliance to move in a new direction and away from reliance on fossil fuels and outside suppliers.
Wind, solar, wave energy, geothermal and second generation biofuels made from algae, cellulose and waste can all be produced locally. They need to stop looking for a magic BIG solution and start implementing many small local solutions.
Arthur on Wed, 2nd Apr 2014 12:20 am
when Germany (re)discovers that they live closer to Russia (and their resources) than to the U.S.
The Germans discovered as early as the days of Willy Brandt and Helmut Schmidt. They were building NG pipelines as early as the seventees (“Erdgasroehrengeschaeft”), when communism was still alive and kicking. And the Americans were standing by and did not like that development at all.
http://de.wikipedia.org/wiki/Deutsch-sowjetische_R%C3%B6hren-Erdgas-Gesch%C3%A4fte
Negotiations about these deals roginated from the fifties, but the Americans blocked an agreement in 1962.
Later the pipeline was built after all.
Makati1 on Wed, 2nd Apr 2014 1:39 am
Seems to me that, come winter, Putin will be holding ALL the cards. What happens between now and then will be interesting.
andya on Wed, 2nd Apr 2014 2:02 am
They had a sweet deal with Russia, instead the rebels chose killing and an ass raping by the IMF. Those rebels are still very much in the government BTW. It’s hard to see why anyone thinks the revolution is a good thing, worse still actually supporting it. Unless of course the general good of the people means nothing, and it’s all about power and control.
rockman on Wed, 2nd Apr 2014 12:10 pm
Makati – Given how the heavy industries in Germany and the Ukraine are so dependent upon Russian NG I would say Putin is holding a rather strong hand today also.
Makati1 on Wed, 2nd Apr 2014 12:41 pm
Rockman, yes, I agree, but the pressure on the average European will strike home much stronger when they get cold. Until then it is just industry and the stock markets, which are ignored by 90% of the population anywhere as they have no ‘investments’ to worry about. Only the upper 10% actually look at the DOW or anything else stock related. They notice changes that daily hit their pocket book and little else. Or so I observe with my friends and family. I could not tell you what any of the market measures are today, but I can tell you the cost of potatoes or coffee.
Arthur on Wed, 2nd Apr 2014 2:20 pm
Somewhere inside the Kremlin, far away from NSA eavesdropping…
Angela: uh Wlad, I am afraid that in the coming weeks I have to make some loud noises. I hope you are not going to take that too seriously, now do you? Our allies expect that from us.
Wlad [grinning]: no, not at all Angie. Here is a list of 24 of my closest staff members. They were in the US last year and cleared their bank accounts there and have no plans to return to the US any time soon. Hit them, Angie, hit them hard.lol Furthermore, why not station a few of your fighters in the Baltics. That will scare the s*** out of us. Btw, I am glad to learn from Gazprom that negotiations concerning the next set of gas contracts are almost completed. Yes, see you in two weeks time to sign the contracts. Bye for now!
Davy, Hermann, MO on Wed, 2nd Apr 2014 2:36 pm
Arthur are they speaking Russian or German?
Boat on Wed, 2nd Apr 2014 2:41 pm
The Europeans picked their poison when they chose to end nuclear power or find a replacement before becoming energy independent.
Ukraine’s best chance is to throw off the old system and join the market economy. They have food, they have energy and they have skills. They have
countries with very advanced technology willing to help. The Ukraine should flourish in a decade if handled right.
https://www.iea.org/publications/freepublications/publication/UK_Summaryplus.pdf
Davey on Wed, 2nd Apr 2014 3:01 pm
Sure Boat, like the rest of the world. Everything I am reading is pointing to a warm and fuzzy conclusion. Human spirit and the markets will prevail it always has. World peace will break out soon and humans will live in harmony, and respect.
Arthur on Wed, 2nd Apr 2014 3:12 pm
Arthur are they speaking Russian or German?
Angie speaks Russian and Wlad German. I think they speak their own language, with words of the other language mixed in between.
In the opening shots of this very interesting documentary, Wlad shows he can speak German very well:
https://www.youtube.com/watch?v=NSKlEEPifIk
After all he was KGB spy in the GDR and It does not make sense to be a spy in a country the language of which you don’t speak.
Davey on Wed, 2nd Apr 2014 3:35 pm
Second tongues get rusty quick. My German is awful now and Spanish bad too since my daughter learned English. I bet Poot lost his touch being a man and The Madam a woman still fluent