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Page added on April 4, 2014
Russia cancels zero export tax for natural gas to Ukraine
Russia on Thursday canceled zero export tax for natural gas it supplies for Ukraine.
“I make a decision to cancel the government’s decree No. 291 of April 30, 2010, taking into account that the (Russia-Ukraine) agreement has been also terminated,” Russian Prime Minister Dmitry Medvedev told Alexei Miller, CEO of the gas monopoly Gazprom, during a meeting.
In April 2010, Russia and Ukraine signed a document known as Kharkov Accord, which established zero export tax for Russian gas. In exchange, Ukraine consented to extend stay of the Russian Black Sea Fleet in Crimea for another 25 years.
According to Medvedev, the reason for the agreement’s cancellation was changing circumstances.
On Wednesday, Russian President Vladimir Putin signed a law terminating four treaties with Ukraine over the Black Sea fleet, including Kharkov Accord.
Medvedev said that due to Kharkov Accord, Russia had been losing profit it could otherwise receive as export levy.
Ukraine must find resources to pay for Russian gas in full and to pay off the debt it has accumulated, he said.
“The people currently making decisions in Ukraine must understand that,” Medvedev noted.
In the second quarter of 2014, Gazprom starts selling gas to Ukraine for 385.5 U.S. dollars per 1,000 cubic meters, a sharp hike from 268.5 dollars agreed last December.
18 Comments on "Russia cancels zero export tax for natural gas to Ukraine"
rockman on Fri, 4th Apr 2014 1:27 am
Russia can use the boost in revenue: Natural gas price in Europe at lowest since 2010: The price of natural gas in Europe has dropped to its lowest level since 2010 as warm weather and high storage levels curb demand for the fuel.
Also sounds like the EU has lost some of the financial incentive to wean itself off Russian energy.
Makati1 on Fri, 4th Apr 2014 1:29 am
And the pressure on the West grows. It appears that most of the money flowing into Ukraine from the West will go straight through to Russia. That will put more pressure on Ukrainians to split and the Eastern half will go to Russia. The EU/NATO will get another Greece in the Western half.
Nony on Fri, 4th Apr 2014 1:50 am
Makes sense for Russia. Why pay for basing when you’ve annexed the territory! đ
Of course, I still, still don’t get why Ukraine doesn’t just tax the very significant amount of gas moving through their country. (I would think just take whatever they want by tapping it out.) Russia still needs that capacity to move the gas to their major markets. (I just honestly don’t get why Ukraine doesn’t do that…after all, we are screwing the Canadians over from moving Albertan bitumen to Gulf port export.)
Nony on Fri, 4th Apr 2014 1:51 am
Were I Ukraine, I would also repudiate any debts to Russia. I mean…why pay commercial charges to someone taking over parts of your country?
rockman on Fri, 4th Apr 2014 3:55 am
Nony – As I mentioned elsewhere all Russia has to do is sell their NG to the EU just like me and virtually ever other US operator: I sell my NG at the meter on my lease. From there it goes into someone’s pipeline system and eventually to the end users. It’s of no concern to me what anyone else charges the end users for that NG…that’s between them and the transmission company. So the Russians simply sell their NG to the EU at their meter at their border with the Ukraine. What the Ukrainians charge the EU buyers is strictly between them…Russia has no dog in that fight. And how much NG the EU buys from Russia and how much less comes out of the Ukrainian pipeline system into the EU isn’t Russia’s problem either…just like me and the pipeline I sell into.
Repudiate the debt…fine. And then Russia only sells NG to the EU and not the Ukraine. Sure…that’s a loss of that cash flow from the Ukraine but that’s much less money then the debt. Of course the Ukraine can always refuse to pipe the Russian NG thru to the EU but then I doubt the EU would allow any imports from the Ukraine nor the IMF make any more of their planned loans to the Ukraine.
IOW what happens in poker when you hold a losing hand? Easy: you lose.
Nony on Fri, 4th Apr 2014 4:08 am
I think there is some element of the Russians and/or EU screwing with Ukraine. Otherwise, you have a huge supplier on one side…huge customer on the other. And a middleman who they both depend on. Ukraine ought to normally be able to exploit that pretty clearly to their advantage and any gas they need would just be lost in the noise. Heck charge that as part of the cost.
I think there is a big difference to how we stiff the Canadians and what Ukraine can get away with. In theory, should be the same, but in theory Crimea was their sovereign land. And Russia has a lot more tanks and has nukes.
Still, if I were them, I’d just be passive aggressive. Don’t repudiate the debt, but just don’t pay it either. And siphon off any gas you need/want. Russians don’t like it…they can shut the supply down. Seems like we had this drama a few years ago.
That said, I admit to not understanding the exact details and am just chatting, like you.
Makati1 on Fri, 4th Apr 2014 6:18 am
Nony, it would be the Europeans that would be challenging the Ukraine if the Ukrainians cut off the gas that was to go through Ukraine to Europe. There are more pipelines into Europe from Russia than just the Ukrainian ones.
Don’t pay the debt and freeze your ass off next winter. Not to mention shutting down power generation and factories. Russia has eastern customers that will buy all they can get.
Difficult to squeeze the supplier of your necessities. That is why any ‘sanctions’ from the US will be ignored by Europe. They cannot afford the disruptions that would happen when Russia cut off their NG and froze the assets of all of the EU and US corporations in Russia. The US is becoming a toothless mongrel.
rockman on Fri, 4th Apr 2014 11:43 am
Nony – I’m sorry but I see no logic in your position. So you repudiate your mortgage debt and you expect to live in your house for the rest of your life? You check out at the supermarket and the bag boy keeps 10% of everything you bought and you’ll accept that?
I don’t think the Russians would have to do anything if the Ukrainians refused to transit the NG through to the EU. I would fully expect the EU govts to crush the Ukraine govt in every way possible. And that wouldn’t exclude using military force IMHO. between Russia and the EU the Ukrainian GDP could be shoved down to zero overnight.
Davy, Hermann, MO on Fri, 4th Apr 2014 12:32 pm
Agreed Rock. Look to the money with Ukraine. Trouble makers will not make it far when big pockets see the cost of a collapsed society and economy in the heart of Europe. The size and population of Ukraine makes it too big to fail for the global system. Russia cannot afford to patch together and support a collapsed Ukraine nor can the EU. If the EU digs itâs heals in the Americans who are clearly the trouble makers here will have to back off. Even the Americans with clear minds will see the contagion of a collapsed Ukraine and a new cold war with Russia. It is a no win policy to peruse economic war in the Ukraine. Pressure behind the scene will be brought to bear to stabilize the situation. If stupidity prevails then this will go down as the Black Swan that brings down the already shaky global economy.
Kenz300 on Fri, 4th Apr 2014 12:46 pm
Relying on Russia for natural gas is a mistake……. there are safer, cleaner and cheaper forms of energy that can be produced locally.
Wind, solar, wave energy, geothermal and second generation biofuels made from algae, cellulose and waste can all be produced locally with local labor. This will provide more energy security and economic security.
Every country needs to develop a plan to be more energy secure. That requires local energy production.
Makati1 on Fri, 4th Apr 2014 1:10 pm
Dream on Kenz.
rockman on Fri, 4th Apr 2014 4:26 pm
Davey â â..a new cold war with Russiaâ. You know Iâm starting to feel that this term is being misused. First, âwarâ implies two different forces are conducting operations against each other. The Russian operations are rather apparent. And where exactly the US/EU conducting operations of any significance? Russia occupies a portion of another country by force and the US cancels the flight reservations of some Russian? Oh yeahâŚtake that, bitch. LOL.
And âcoldâ seems to imply no movement: a cold status as opposed to going weapons hot. Russian has taken control of Crimea, has taken control of the offshore oil/NG fields that once belonged to the Ukraine, Russia has drastically increased the price of NG itâs selling to the Ukraine. Thatâs rather âhotâ IMHO. And the US/EU reactions? Well, I guess that you could call them cold. As in assuming room temperature when one is dead.
Maybe I would go with a cold/hot warâŚshould we just say luke warm war then? Or maybe a cold/uncomfortably warm war. I donât know: itâs difficult to come up with a catch phrase that describes the actions of two parties acting very differently from each other. Maybe we should just stick with winner/loser war. Thatâs how most wars end up anyway. LOL.
Davey on Fri, 4th Apr 2014 4:45 pm
Well Rock what ever we end up calling it let us say it is just what we don’t need right now. I have to blame both sides. Both sides are stuck in a twentieth century mentality of a great game. Both sides are naked and fiddling while the place is set to burn down.
Boat on Fri, 4th Apr 2014 6:55 pm
Pipelines are vulnerable. They will probably be blown up if conflict starts. It really won’t matter who does it. At that point it won’t matter what the blame is for anything. Only the solution for a huge mess which will probably take decades with much suffering, blood and treasure will be the topic. The biggest question is can the war be confined to the Ukraine or will it spread to a global conflict.
rockman on Fri, 4th Apr 2014 9:02 pm
Boat – Pipelines can be repaired. And not that difficult to defend: you just kill everyone that comes within a mile of one. I doubt the folks in the EU would bitch too long if 30,000 were killed to protect their NG supplies.
radon1 on Fri, 4th Apr 2014 10:36 pm
Nony – Ukraine is not going to pay its debts to Russia anyway (or to anyone else, except “shrewd investors” currently bailed out by IMF). So no worries here. They will just not tell this to anyone, they will simply not pay.
Well – actually, the current Ukrainian governments may declare the debt non-payment openly – but they are proven idiots.
kervennic on Sat, 5th Apr 2014 12:01 am
Cuba made it with much fewer available resource. Cuba life expectancy: 78. US: 78.6.
Russia: <70.
Keep cool Ukraine, you can live without gas.
Davy, Hermann, MO on Sat, 5th Apr 2014 12:22 am
Smack on RADON – If anything keeps Russia reasonable with Ukraine it will be the anticipation of IMF $ to cover Ukrainian debt owed.