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Page added on April 5, 2014
Ukraine raises fears of gas price war with Russia
Arseniy Yatseniuk said Ukraine did not accept the price of $500 per 1,000 cubic metres that Russia this week set for its Ukraine-bound gas.
“This price level is of the highest in Europe . . . it’s political, not economic. Ukraine is ready to continue buying natural gas at the price from last year . . . that is $268. This is an acceptable and market price,” he said.
Russia in 2009 completely halted gas transit through Ukraine amid a price dispute causing serious disruptions in eastern European gas markets. During the first price dispute in 2006, Ukraine allegedly siphoned EU bound gas for domestic needs after Russia sharply reduced transit flow.
Fears of supply disruptions after Russia took control of Crimea saw the price of UK natural gas, the benchmark European futures contract, leap to 61.7p a therm last month. However, the price has been in retreat ever since. The price of natural gas in Europe is at its lowest level since 2010 as warm weather and high storage levels curb demand for the fuel, but Russia supplies about 30 per cent of Europe’s natural gas, with almost half of it piped through Ukraine.
Warning that the next step of Russia could be to restrict natural gas supplies, Mr Yatseniuk urged his government and Western officials to prepare. He called upon the EU to pressure Slovakia’s gas transit pipeline operator into sanctioning so-called reverse gas transit flow schemes, allowing Ukraine which relies heavily on Russian fuel imports to diversify by importing European market gas.
Russia has not managed to grab Ukraine through military aggression, so now they are pursuing a plan to pressure and grab Ukraine through gas and economic aggression– Arseniy Yatseniuk
Mr Yatseniuk spoke after Alexei Miller, the chairman of Gazprom, reiterated that Moscow might seek $11.4bn in reimbursement from Kiev for gas price discounts from prior years that were unilaterally cancelled this week.
Russia annulled a 2010 agreement through which Kiev got a gas price reduction in return for prolonging Russia’s right to use a Crimean port as base for its Black Sea naval fleet.
“Russia was paying an advance . . . therefore, the $11.4 billion is a debt that Ukraine has accrued to Russia,” Mr Miller said.
Kiev is trying to make a $2.2bn outstanding payment to Gazprom.
Mr Yatseniuk said Ukraine would “make all payments for previous gas supplies,” but “political pressure will not pass.”
Mr Yatseniuk said Ukraine could seek to defend its interests through arbitration if gas price talks with Russia failed. “If we don’t agree, there is a procedure foreseen in the agreements,” he said, “appealing to the Stockholm arbitrage.”
10 Comments on "Ukraine raises fears of gas price war with Russia"
dissident on Sun, 6th Apr 2014 4:32 am
Drivel. Russia did not even try to grab Ukraine through “military aggression”. And the alleged 100,000 troops on the border (as if that is enough invade a country of 45 million, LOL) are not even there. This article lies about the 2009 cutoff. It was Yuschenko who closed the valves and Gazprom had an independent Swiss monitoring firm to prove it. Ukraine’s new regime is playing Yuschenko’s game and trying to blackmail Russia by holding the transit flow to the EU hostage.
BTW, there was a referendum in Crimea before any “annexation”. These monkeys are revising history a few days after it happens. Is the memory of the media consumer really so short?
DC on Sun, 6th Apr 2014 5:33 am
Nice bit of old school yellow journalism in this ‘piece’ Piece of what, fill in the blanks as you will.
The ‘old’, and (current) zionist oligarchs bled Ukraine dry-that was their first priority. Somewhere way down on the list, was paying their gas bills. The old ‘pro-Russian’ govt had a real problem with that. The new ‘IMF-NATO’ approved group of criminals isn’t going to be any improvement in that dept either, that much is clear. Ukraine doesn’t have enough to in the bank to pay its gas bill-let alone all of its other foreign(IMF related) debts. If Russia were to demand payment for even 1/2 of what they are owed, for gas alone-Ukraine is bankrupt. Fortunately for the average Ukrainian, the Russian Federation does not want to punish the people of Ukraine. The IMF neo-Nazis cabal pretending to be the govt? Moscow probably have a less generous view of their well-being and feelings.
The Russian gov’t has much to do to sort this mess the uS created.It will be a difficult year ahead for the people of Ukraine and Russia, even at best.
Arthur on Sun, 6th Apr 2014 7:45 am
Fortunately, Yats has a new ally enjoying a natural gas glut, so all problems solved. Expect a traffic jam of US LNG ships through the Bosporus, heading for Odessa and Nikolaev.lol
Seriously, nothing would suit Putin better if it were the Kiev-Ukrainians who would shut off supplies heading for Europe, so Putin does not have to implement sanctions himself, to make Europe feel the seriousness of the energy situation as well as the futility of the EuroMaidan Piruss victory. For people who are conscious of fossil fuel depletion, a real supply shock lasting months caused by geopolitical developments, would be very welcome in that it would mobilize Europeans even more in making renewable energy a matter of national emergency.
Arthur on Sun, 6th Apr 2014 9:17 am
Poll in the British Independent about ‘your favorite world leader’:
http://vineyardsaker.blogspot.nl/2014/04/amazing-poll-at-independent.html
Fascinating result. Obviously, this poll has global reach.
Makati1 on Sun, 6th Apr 2014 11:07 am
Arthur, the idea of the EU being independent energy wise, is a joke. Even if it were an all out effort, the build out would require energy the EU does not have nor does it have the finances necessary nor the years it would take. It has about 6 months until temperatures begin to fall across the EU. Nor is totally ‘renewable’ energy possible as it does not exist outside of plant photosynthesis.
rockman on Sun, 6th Apr 2014 12:42 pm
“He called upon the EU to pressure Slovakia’s gas transit pipeline operator into sanctioning so-called reverse gas transit flow schemes, allowing Ukraine which relies heavily on Russian fuel imports to diversify by importing European market gas.” It’s difficult to tell if Yates is that ignorant of basic economics or just doesn’t want to say the obvious out loud: he wants the EU to continue to buy Russian NG and then resell it to the Ukraine for less. And I assume that if the EU were to comply it wouldn’t cut back on NG deliveries to it’s citizens. So what he’s really asking is for the Russian NG to continue to be exported to the Ukraine as it is now and for the EU to pay the price difference.
And for those who don’t appreciate the “pipeline reversal” angle: a number of EU countries, such as Hungary, are planning to reverse the flow on some pipeline systems to allow importing Russian NG by completely BYPASSING THE UKRAINE. And the Russians also have hopeful plans to build other pipelines that also bypass the Ukraine.
And the Ukraine has another problem with this possible bluff: while they may be dependent upon Russian NG imports the Ukrainian gov’t is also dependent upon the fees it collects for shipping the NG to the EU. So If they pull that trigger they not only lose the Russian imports they lose significant review needed to acquire alternative energy sources. Granted all three parties – the EU, Russia and the Ukraine – would all suffer to some degree. But given the current political situation in the Ukraine it’s difficult to imagine the Ukrainian gov’t not being overthrown in weeks…if not days, if it were to embargo EU NG.
Arthur on Sun, 6th Apr 2014 1:05 pm
Arthur, the idea of the EU being independent energy wise, is a joke. Even if it were an all out effort, the build out would require energy the EU does not have nor does it have the finances necessary nor the years it would take. It has about 6 months until temperatures begin to fall across the EU. Nor is totally ‘renewable’ energy possible as it does not exist outside of plant photosynthesis.
According to current trends 50% renewable, measured against current consumption levels, in 2040 in Europe should be possible. That’s enough to survive at a somewhat recognizable modern level. If energy would be made a real life and death priority, that could be speeded up.
@rockman: good analysis, as usual. I can assure that Europeans have ZERO intention in starting a major conflict with Russia. The NATO bunch are making themselves important with self-serving noises as if Europe is about to being invaded by the Ruskies, Merkel chimes in (only to appease Washington) but in reality is quietly signing one new giant gas contract after the other with the Russians. If she would act otherwise, German industry would have her take a hike within no time. There is still a good chance that the Ukrainian crisis will sizzle out and the Ukies will come to their senses. The elections scheduled for May will show that EuroMaidan absolutely does not represent the majority in the Ukraine but 50% at best. And that a wish for a better (material) life was the real inspiration behind EuroMaidan, not Russiaphobia, that’s only alive in Lvov, the only part of the Ukraine that wants to be part of Europe, even without the money.
Davy, Hermann, MO on Sun, 6th Apr 2014 1:07 pm
Deec said – The Russian gov’t has much to do to sort this mess the uS created.It will be a difficult year ahead for the people of Ukraine and Russia, even at best.
Deec, you are giving more credit to the US then they deserve. This is a problem that started with Stalin through today. Ukraine problems are a product of so many issues to finger point to the US for creating it is a PPI statement (political propagandist ideologue) statement.
Let us face it Ukraine is a too big to fail place with 45MIL population, a major food producer, energy transit point, and geographically strategic. The EU nor Russia can afford to manage the mess that would shake out. It would be far cheaper for the global system if Russia, EU, and the rest of the world find a way to economically patch together a country that is a mess in so many ways. I might add for many reasons other than their own making. There are many players responsible for this mess.
Arthur on Sun, 6th Apr 2014 3:13 pm
Davy, DC is pointing at the 5 billion invested by the State Department to “transform” the Ukraine into a western pawn:
https://www.youtube.com/watch?v=2y0y-JUsPTU
…culminating in the “Nuland coup”, where ten thousands of nationalist hotheads from Lvov with baseball bats were paid by State to travel to Kiev and beat the Yanukovitch government out of office. It was that event that triggered Putin’s move in the Crimea, to at least hold Sevastopol and it’s navy base.
The mess.
Davey on Sun, 6th Apr 2014 3:53 pm
Art, drop in the bucket compared to 80 years of trouble, manipulation, genocide, economic scalping and Nuk incompetence at NPV in today’s dollars. Art, you are the history buff you should know this!