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Page added on May 13, 2014
Ukraine needs more gas to avoid problems in winter
Russia’s Gazprom (GAZP.MM) demanded a $1.66 billion pre-payment from Ukraine for June gas deliveries on Tuesday, saying the neighboring country had only half its requirements in storage to ensure a trouble-free winter.
Citing a preliminary bill, Moscow pressed ahead with its demand that Ukraine pay for June deliveries early next month, heightening a dispute over price that is pushing the two countries closer to another gas war that could cut supplies.
Previous disputes over gas have left Europe, which gets around a third of its gas needs from Russia, with limited supplies at the height of winter, spurring it to look for alternative producers. But so far it has been unable to break its dependence on Moscow.
State-controlled Gazprom said the bill was based on Ukraine taking up a contractual amount of 114 million cubic meters per day, or 3.4 billion cubic meters for the month in total.
“Taking into account non-working days, Naftogaz should pay this bill by June 2 and, starting from June 3, the company will be getting gas … only at the volumes paid for,” spokesman Sergei Kupriyanov said in a statement.
This means that Ukraine needs to pay $1.658 billion for June’s gas deliveries based on a price of $485 per 1,000 cubic meters, he added.
Naftogaz confirmed it had received the bill but declined to comment further.
Ukraine wants to change the conditions of a 2009 contract that locked Kiev into buying a set volume, whether it needs it or not, at $485 per 1,000 cubic meters – the highest price paid by any client in Europe.
Moscow dropped the price to $268.5 after then-President Viktor Yanukovich turned his back on a trade and association agreement with the European Union last year but reinstated the original price after Yanukovich was ousted in February.
Kiev has so far refused to pay the higher price, saying gas is being used as a political tool by Moscow to punish Ukraine’s new leaders for moving closer to the European Union.
In an interview with Reuters last week, Ukrainian Energy Minister Yuri Prodan called $268.5 per 1,000 cubic meters “a market and a fair” price for gas, which Kiev is able to pay.
He said Kiev would take Gazprom to court if the two sides failed to agree on price by May 28, a procedure used by Gazprom’s other clients in Europe to win price cuts over the last couple of years.
“Though Gazprom has many times threatened to introduce pre-payment to Ukraine, this latest announcement will likely further amplify the risk of possible trouble with stable gas transit to Europe,” Alfa Bank said in a note on Tuesday.
A LACK OF GAS IN STORAGE
Vitaly Markelov, a Gazprom deputy chief executive, said earlier on Tuesday that Ukraine lacked around half of the gas needed in storage to avoid problems in winter.
“According to our colleagues (in Ukraine), 9 bcm is in storage. To pass through autumn and winter periods normally, we estimate that (Ukraine) needs around 18.5 bcm (in total),” Markelov told a news conference.
Twice in the past decade, price disputes have led to reduced supplies of Russian gas to European clients via Ukraine, a conduit for about half the gas Europe imports from Russia.
Ukraine received the first tranche of about $3.2 billion from a $17 billion two-year aid program from the International Monetary Fund last week, which Moscow hopes Kiev will use to cover gas debts.
Anatoly Yanovsky, Russia’s deputy energy minister, said on Monday Moscow would be ready to continue talks with Kiev on gas only after Kiev paid off its debt.
A Gazprom representative said on Tuesday gas flows to Europe via Ukraine remained stable.
The worst East-West standoff since the Cold War over Ukraine has spurred efforts to try to reduce Russia and Europe’s energy interdependence. Europe is scrambling to diversify supplies and, faced with Western sanctions, President Vladimir Putin has looked to the east for new export markets.
Putin plans to visit China on May 20 and Gazprom hopes to sign a gas contract after years of talks to supply Beijing with 38 bcm per year – volumes comparable to deliveries to Germany, its biggest gas client.
Yanovsky said the gas contract was “98 percent” ready. Sources told Reuters last month Gazprom was hoping China would agree a price of $10-$11 per mmBtu (million British thermal units).
China is believed to pay $9 per mmBtu to Turkmenistan, the Central Asian state that beat Gazprom to the Chinese market.
Asked if Gazprom was considering inviting Chinese companies to develop its fields, an offer which could help spur moves to seal the contract, Markelov said: “We are not looking at such cooperation.”
21 Comments on "Ukraine needs more gas to avoid problems in winter"
Davy, Hermann, MO on Tue, 13th May 2014 2:00 pm
If you follow Kunstler’s blog then you know his point of view. If you were any other consumer or nation for that matter if you buy something you should pay the bill. In the case of gas if you can’t then your gas bill you gets cut off. How friggen hard is that to understand? If Ukraine cannot pay its gas bills it should admit it is a failed state and be broken up. If Europe and the US want to prevent that then send the Helicopters with money and make air drops. If that is the trend then the fed and the Europeans need to run the money printing machines on Sunday. I would like to know how bad Moscow is putting the screws to Kiev compared to Europe and the almost completed China deal. I could not quite figure out what the relative prices were. Ukraine should get some kind of rebate for using the pipelines. Anyway maybe Rock will enlighten me with what Ukraine is paying relative to China and elsewhere in Europe.
Northwest Resident on Tue, 13th May 2014 2:46 pm
The story behind the story is that Russia is going broke and if they don’t get some big infusions of cash in the near future then their aging gas pipelines and other infrastructure are going to fall into a pile of dust. Obama can’t just go to congress and say hey, let’s loan Russia a few billion $$$. But if poor little Ukraine needs to be saved from big bad Russia, then we can get the American people to go along with a $3 billion or so loan to Ukraine, most of which will go directly to Russia.
Ukraine is dirt poor and always will be. They’ve been used and abused and the country has been run for personal elite profit for so long that it might as well be forever — since written history at least. If Ukraine stays poor or gets poorer, no harm done. If Russia can’t keep up maintenance on their pipelines and oil/NG production, then THAT is a big deal with major implications.
Plantagenet on Tue, 13th May 2014 2:53 pm
Joe Biden’s son just joined the Board of Directors of the biggest Ukrainian Natural Gas Corporation.
Since its unlikely Mr. Biden was hired because of his expertise in Ukrainian natural gas, the only other reason he would get hired is that the fix is in.
Northwest Resident on Tue, 13th May 2014 2:59 pm
Being on the board of directors is not the same as being hired. Biden is not an employee. He is there to advise at minimum, most likely to provide the American political environment POV and other fairly normal reasons. How do you arrive at the conclusion that he was “hired” or that “the fix is in”? What “fix”?
Plantagenet on Tue, 13th May 2014 3:43 pm
Biden’s son was hired and is being paid a handsome salary to be on the board of directors of the Ukrainian energy company. Obviously the only reason he was hired because of his father — VP Joe Biden.
Or do you believe young Mr. Biden is an expert on Ukrainian Natural Gas?
Northwest Resident on Tue, 13th May 2014 3:53 pm
Plantagenet — Here is a much more accurate description of what Biden will be doing in Ukraine than you initially posted. (NOTE: He is NOT on the board of directors, his work does not require any kind of expertise in Ukrainian Natural Gas.) Plant, when you hear stuff on Fox News or right-wing anti-Obama websites, you should double check the information for accuracy because it is well established that those “news” sources are extremely biased, and more interested in agendas than in putting out the truth. Just a suggestion…
Joe Biden’s son Hunter to head legal unit at Ukraine’s largest private gas company
Vice President Joseph R. Biden’s youngest son, Hunter, has been appointed head of legal affairs at Ukraine’s largest private gas producer.
Burisma Holdings said in a statement that Hunter Biden will be in charge of the company’s legal unit and will provide support for the company among international organizations.
“Burisma’s track record of innovations and industry leadership in the field of natural gas means that it can be a strong driver of a strong economy in Ukraine,” Mr. Biden said.
“As a new member of the Board, I believe that my assistance in consulting the Company on matters of transparency, corporate governance and responsibility, international expansion and other priorities will contribute to the economy and benefit the people of Ukraine,” he said.
White House press secretary Jay Carney said Tuesday that Mr. Biden’s new position “does not reflect an endorsement by the administration,” Time magazine’s Zeke Miller reported.
Read more:
washingtontimes dot com/news/2014/may/13/joe-bidens-son-hunter-head-legal-unit-ukraines-lar/#ixzz31dBxpFsM
Follow us: @washtimes on Twitter
J-Gav on Tue, 13th May 2014 3:56 pm
Davy – You beat me to that comment (ie Kunstler).
Davy, Hermann, MO on Tue, 13th May 2014 4:09 pm
Well, NR, you have to admit it is still slimy considering the situation. Do we need to be going into a PR battle with Russia with egg on our face. It is already slimy that the CIA and US private mercenaries are over there consulting. This is normal but it does not do much on the PR front. I guess the DC mafia does not care anymore. I mean, they are doing shenanigans in DC why not Ukraine!
Plantagenet on Tue, 13th May 2014 4:14 pm
Hi NW resident. So you were WRONG when you FALSELY claimed Joe Biden’s son wasn’t HIRED by the Ukrainian energy company. He was HIRED, wasn’t he? Shame on you for trying to COVER THIS UP.
Face facts—the only reason Joe Biden Jr. was hired is that his dad is VP Joe Biden. The Ukrainians (and anyone with common sense) know that Joe Biden Jr. has a direct line into the US White House. Joe Biden Jr. can now call up his dad and lobby for US aid to Ukraine and to his company, at a time when the Obama administration is pledging a billion in aid to Ukraine.
Northwest Resident on Tue, 13th May 2014 4:27 pm
Plant — I said “Being on the board of directors is not the same as being hired. Biden is not an employee.”
That was based on your claim that he joined the board of directors, which I took as fact, but it turns out to be false.
Joe Biden Jr. getting this position is no big deal as far as I can tell. Or would you like to make the case that when Republican presidents are in office that their friends, relatives and big buck$ political donors never get positions based on their access to the white house? Our political system is totally corrupted, Plant, and one president or the other isn’t going to change that. The super-wealthy money men are in charge — everybody you see like Biden and Obama are just temporary employees doing a job. All the big decision-making is done by the real bosses.
Plantagenet on Tue, 13th May 2014 4:31 pm
You are such a liar Northwest Resident. Of course Mr. Biden was hired by Burisama Corporation of Ukraine. He will serve on the BOARD OF DIRECTORS and in their legal division. Your claims to the contrary are all lies. Please stop your lying.
http://burisma.com/hunter-biden-joins-the-team-of-burisma-holdings/
Please check it out and then apologize for your lies.
Northwest Resident on Tue, 13th May 2014 4:41 pm
Oh, so he will be on the board of directors and on the legal team. Okay then. My apologies to you Plantagenet.
Not lies, Plantagent. Just misinformation. Take it easy.
You still spend way too much time obsessing about Obama and all the evil you attribute to him. Biden getting this job is No Big Deal — so, I don’t even know why you posted it if for any other reason than to arouse suspicion that dastardly deeds were being perpetrated by Obama’s admin — your favorite theme.
Northwest Resident on Tue, 13th May 2014 4:47 pm
Plant — Here’s what I read (below). So, you’re probably right. “The fix is in” — no way did this totally unqualified bozo get the Ukraine gig based purely on his experience. He’s just an Obama lackey, just like you say, and that is the “only reason” he got hired. 🙂
R. Hunter Biden is a counsel to Boies, Schiller & Flexner LLP, a national law firm based in New York, USA, which served in cases including “Bush vs. Gore”, and “U.S. vs. Microsoft”. He is one of the co-founders and a managing partner of the investment advisory company Rosemont Seneca Partners, as well as chairman of the board of Rosemont Seneca Advisors. He is an Adjunct Professor at Georgetown University’s Masters Program in the School of Foreign Service.
Mr. Biden has experience in public service and foreign policy. He is a director for the U.S. Global Leadership Coalition, The Center for National Policy, and the Chairman’s Advisory Board for the National Democratic Institute. Having served as a Senior Vice President at MBNA bank, former U.S. President Bill Clinton appointed him an Executive Director of E-Commerce Policy Coordination under Secretary of Commerce William Daley. Mr. Biden served as Honorary Co-Chair of the 2008 Obama-Biden Inaugural Committee.
Mr. Biden is a member of the bar in the State of Connecticut, and the District of Columbia, the U.S. Supreme Court, and the Court of Federal Claims. He received a Bachelor’s degree from Georgetown University, and a J.D. from Yale Law School.
R. Hunter Biden is also a well-known public figure. He is chairman of the Board of the World Food Programme U.S.A., together with the world’s largest humanitarian organization, the United Nations World Food Programme. In this capacity he offers assistance to the poor in developing countries, fighting hunger and poverty, and helping to provide food and education to 300 million malnourished children around the world.
Davey on Tue, 13th May 2014 4:58 pm
N/R that smells like a DC mafia resumee. All the right ingredients to specialize in legalized corruption.
penury on Tue, 13th May 2014 5:07 pm
And an American should serve on the board of Directors for a ukranian Oil or Gas Co for the following three reasons” please enter your reasons thank you. Gow many serve on the board of Directors for iran, Saudia Arabia,just asking.
penury on Tue, 13th May 2014 5:08 pm
And an American should serve on the board of Directors for a Ukranian Oil or Gas Co for the following three reasons” please enter your reasons thank you. How many serve on the board of Directors for Iran, Saudia Arabia,just asking.
Plantagenet on Tue, 13th May 2014 5:37 pm
Hi Northwest Resident
Thank you for your gracious apology.
We all make mistakes, Again, I much appreciate your honesty in apologizing.
CHEERS!
energy investor on Tue, 13th May 2014 6:13 pm
IMHO, Young Biden just adds another nail in the coffin of those who claim there was no Western meddling in Ukraine before the revolution. His appointment may be based on his expertise but everyone knows the world already has more lawyers than is desirable. So why is a Ukaraine gas company stupid enough to appoint a Biden? It can only be because they expect Dad to bail them out. No other explanation is rational.
Appearance is reality and the Russian news agencies will show this as evidence of what it is – crony capitalism.
I don’t have any problem with that – although I would if I was a US taxpayer.
Northwest Resident on Tue, 13th May 2014 9:10 pm
Plantagenet — I’m one of those people who doesn’t have a problem fessing up when I’m wrong. It clears the air. Honesty is the aura that I want surrounding me.
Shit happens. Also, when you make so few mistakes as in my case, it isn’t often that I have to admit that I’m wrong…:-)
And if you believe that…
rockman on Tue, 13th May 2014 9:46 pm
Davey – “Ukraine should get some kind of rebate for using the pipelines.” Actually they get paid a fee to transport the NG to the EU countries. As far as prices being paid by other countries I haven’t seen numbers and if I had I wouldn’t believe them. And besides NG is priced on the local dynamics. What a producer in PA gets paid or his Marcellus production has no bearing on what I get paid for my S La production: different markets – different dynamics.
And the dynamics cm hinge on the volume purchase guarantee as much as the price. That was one of Ukraine’s problem: they didn’t need as much NG as they eventually needed but were till obligated to pay for it. We have the same tough provisions in most US NG contracts: we call it the “take or pay” provision. Even of you don’t take delivery you’ll pay me something. The entire NG system in the US, from well head to consumer burner tip, depends are fixed volume guarantees. In fact, there are federal laws that will heavily fine you for not only under producing your commitment but also over producing. And it goes the other way just as harsh: if NG supplier can’t deliver the contracted volume to utility customer they might have to buy spot gas and sell to their buyer at a lower price then they paid. I’ve personally seen many tens of $millions lost in this fashion.
Davy, Hermann, MO on Wed, 14th May 2014 6:10 am
Rock, I wish I knew the price detail. I would like to know if Russia is putting the screws to the Ukraine or if it is being fair. If Russia is being fair then screw the Ukraine and the West. Global trade is not about “free-bees”. There is no free lunches in this system. There is always an angle and an edge with global trade. Why should Russia support a hostile Ukraine with meddling western partners.