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| Europe |
| Russia Cuts Off Gas to Ukraine in Cost Dispute |
| 2006-01-02 |
| MOSCOW, Jan. 1 - Russia cut off the natural gas intended for Ukraine on Sunday as talks over pricing and transit terms unraveled into a bald political conflict that carried consequences for Ukraine's recovering economy and possibly for gas supplies to Western Europe. The dispute comes a year after the Orange Revolution brought a pro-Western government to power in Ukraine. It ends a decade of post-Soviet subsidies in the form of cheap energy that allowed Russia to retain some influence over the former Soviet republics. Choking off the westbound pipes is a striking gamble by Russia, one likely to send political and economic ripples westward in the months ahead. Russia is positioning itself to become an energy-supplying nation capable of easing dependency on Middle Eastern oil in Western Europe and even in the United States. Gazprom, the Russian energy giant, 51 percent of which is owned by the state, provides about a quarter of Western Europe's natural gas. Under a system begun in the Soviet era, 80 percent of Russia's exports to Europe have passed through Ukraine. Gazprom said it had reduced the flow to equal the volumes it agreed to provide to Western countries, minus what the company provides for the Ukrainian domestic market. Sunday's early-winter cut in gas supplies to Ukraine came as an unsettling reminder that promises of energy exports are not Russia's only method of using oil and gas to further its foreign policy goals - it can also turn off the valve of energy exports. Tellingly, President Vladimir V. Putin of Russia was personally involved in the negotiations. It was he, rather than company officials, who made the final offer of a grace period on Saturday. A jump in Russia's utility bill to Ukraine is at the heart of the current conflict. Russia is seeking to charge $220 to $230 per 1,000 cubic meters of natural gas, up from $50. Ukraine's economy has depended on buying cheap energy from Russia, which provides about a third of its natural gas supply. The 11th-hour effort to head off the shutdown failed. On Sunday, Ukraine's natural gas distributing company, Naftogaz, said it had faxed a draft contract to Russia shortly after 11 p.m. Saturday - agreeing to terms laid out earlier that evening by Mr. Putin, the company said in a statement. At around 10 a.m. on Sunday, Gazprom began cutting the pressure on pipelines at the border with Ukraine, and the effect on the Ukrainian web of pipelines was felt later in the day. Gazprom reduced the pressure in the gas mains leading to Ukraine at three metering stations and ceased boosting pressure in the westbound pipelines from a storage system that is designed to keep the pressure up during peak demand in the winter. |
| Posted by:Steve White |
| #19 Pooty choked. |
| Posted by: Nimble Spemble 2006-01-02 16:39 |
| #18 LOL. This is the same pipeline that Willy Brandt pushed as part of his Ostpolitik policies. The same pipeline which Reagan opposed since it would inject more hard currency into the Soviet economy and thereby prolong the collapse of said economy. Where are the headlines at the NYT about "blowback?" BTW, Rooters, the "news" agency, is now saying that the Russkies are backing down. |
| Posted by: 11A5S 2006-01-02 16:27 |
| #17 Energy is the life blood of the modern world, so sure, natural gas and petroleum will be used as leverage or a weapon when someone wants to dominate over another country. Directional drilling and well development technology is a quantum leap above what it was a few decades ago. The well footprints now are a fraction of what they were when Prudhoe Bay was developed. Yet we are not developing ANWR, and we are still in negotiation over the Prudhoe Bay gasline (whatever way it will go). Now the enviro-nutz are making this big emtional to-do over ANWR and other coastal or offshore oil and gas areas of potential in California and Florida. Some may call it environmental awareness, but I call it a power grab. They are controlling the energy sources, so they will have the power. So the reason is not really the reason. We do have a chance to plot our energy course, but we better get with it, or we will have our own Putins plotting our course, like the Ukraine is experiencing. Footnote: Ima glad that my Jewish farmer ancestors left the Ukraine in the 1800s, or I would not be here to discover Rantburg, heh. |
| Posted by: Alaska Paul 2006-01-02 13:32 |
| #16 Hey, its Russia's gas. The fact that they choose to charge Ukraine 20% of that they charge elsewhere, doesn't mean they've any obligation to continue in perpetum. You're cheerfully ignoring the rest of the circumstances. There's a reason why they charged only 20% of what they charged elsewhere. And now there's also a reason why they suddenly want a 460% increase, and only from Ukraine. |
| Posted by: Rafael 2006-01-02 13:27 |
| #15 Hey, its Russia's gas. The fact that they choose to charge Ukraine 20% of that they charge elsewhere, doesn't mean they've any obligation to continue in perpetum. You're cheerfully ignoring the rest of the circumstances. There's a reason why they charged only 20% of what they charged elsewhere. And now there's also a reason why they suddenly want a 460% increase, and only from Ukraine. |
| Posted by: Rafael 2006-01-02 13:27 |
| #14 #5: This has heads in Germany and France spinning and toilets overflowing. Energy as a geo-political tool scares the bejebus out of the Huns and Frogs. Ummm, I remember an article sometime last year that the Germans were going Green, banning Nuclear Generators and buying their electricity from France (Who has no such stupidity about Nuke plants) This seems to me jus another extension of the same thing, Energy as a weapon and tool. |
| Posted by: Redneck Jim 2006-01-02 12:03 |
| #13 Oh, it's already been fixed. Thanks. ANYWAY, my analysis: two marketing agreements and one launcher-program-with-Russian engines, all of which represent total probably a couple billion dollars of investment, may have just become dead overnight thanks to the current tiff between Russia and Ukraine. Everyone who said "The US plays politics with space (with their insistance that the Russians not give Iran the bomb and whatnot) but the Russians just want to make money" just got a rude awakening. |
| Posted by: Phil 2006-01-02 11:17 |
| #12 Oh drat, is there an editor around? I didn't realize the length of the link... |
| Posted by: Phil 2006-01-02 11:13 |
| #11 .com, I've been _thinking_ about that, and about reports elsewhere. I recommend the following thread on sci.space.policy: Link Now depending on how much of the background you know about both EELV programs... summarizing: Boeing has one launcher for the EELV program, for launching government payloads, and resells Zenit for commercial launches. Lockheed has the same situation, with the added bonus that its EELV system uses Russian engines; they resell Protons and Semyorkas under a marketing arrangement. That's all just been wrecked. The only way the US is going to have a commercial launcher now is if they can make Delta IV work, but it's been undergoing the typical government launcher cost and schedule creep. The only alternative the US has is if Elon Musk can work the bugs out of his system atm, or longer term, one of the other startups can get their systems going. Boeing and Lockheed both have billions of dollars down the drain now. Other than SpaceX's efforts (and those of the other startups), there's been _one_ new design rocket engine done in the US in the past thirty-five years by the big aerospace companies/government contractors. |
| Posted by: Phil 2006-01-02 11:06 |
| #10 I note that none commented on it... but me. What was left to say after .com had spoken? |
| Posted by: Snavirong Grash5138 2006-01-02 10:51 |
| #9 Ah, power. Putin has stepped over that line of arrogance in his own power. Builing the pipe-line is so totally in your face and arrogant on so many levels that IMHO it rises to the point of stupidity on a par with Assad killing Hariri or Zarqawi's group bombing a wedding in Jordan. Inertia requires a force. Russia just gave it a big shove. |
| Posted by: 2b 2006-01-02 10:51 |
| #8 The problem, .com, is that you build the pipeline first, then you stiff the Ukes. You'd think a gangster like Putin would know the rules of being an evil overlord. |
| Posted by: Steve White 2006-01-02 10:22 |
| #7 Guess Russia's not too keen on those Black Sea ports anymore? From that angle, this looks like a not-so-smart move. |
| Posted by: Raj 2006-01-02 09:17 |
| #6 Hey, its Russia's gas. The fact that they choose to charge Ukraine 20% of that they charge elsewhere, doesn't mean they've any obligation to continue in perpetum. |
| Posted by: gromgoru 2006-01-02 07:39 |
| #5 This has heads in Germany and France spinning and toilets overflowing. Energy as a geo-political tool scares the bejebus out of the Huns and Frogs. |
| Posted by: Mahou Sensei Negi-bozu 2006-01-02 04:06 |
| #4 Overlooking this RB article, aren't you folks? I note that none commented on it... but me. |
| Posted by: .com 2006-01-02 01:58 |
| #3 Ivan raises the stakes bigtime. It will be interesting to see the "United Euro" and "United Nations" response. LOL! prepare for more face time: Kofi Jacques-strap Putty No doubt, in the end it will be Bushes fault and cost the US taxpayers more money. |
| Posted by: Red Dog 2006-01-02 01:47 |
| #2 Russia's asking price is less than half what we're paying in the US. Not sure what you want to imply, but keep in mind that US incomes are astronomically higher compared to Ukraine. A five-fold, over-night increase is unreasonable. It's not even a money grab, it's essentially a siege, for reasons well known. If it was a domestic company increasing its prices you could make some sort of economic argument, but in this case, this money is going on a one-way trip...to Moscow (and only into select pockets). |
| Posted by: Rafael 2006-01-02 01:28 |
| #1 My pack of the envelope calculation based on a DOE quote of about $14.71 per thousand cubic feet for natural gas prices for January delivery and about 34 cubic feet per cubic meter, Russia's asking price is less than half what we're paying in the US. Does that pass the reality check from anyone who actually knows what they're talking about on this subject? |
| Posted by: Gluque Crolet3069 2006-01-02 00:44 |