Sunday, January 01, 2006

Putin puts the boot in

Polish gas company PGNiG reports that at 11.00am today it detected a drop in gas pressure on the Polish-Ukraine border.

Russia shutting off the taps at 7am local time will affect 14% of Polish supplies, as much of gas imported from Russia passes through Ukraine before it gets to Poland.

Analyst types are saying that, deprived of gas from Russia, Ukraine might be tempted to dip into supplies earmarked for other countries.

More than 80% of European gas supplies come through Ukraine.

Gazprom wants to increase the price of its product four times. Ukraine, unsurprisingly, wants to keep its relatively cheap gas relatively cheap.

You don't have to be a genius to work out that the gas-bullying is the Putin regime's answer to the Orange Revolution.

But once again, Poland finds itself rather too close geographically to the Big Angry Bear.

Poland was already outraged last year when Russia announced that it would be building an underground pipeline straight to Germany, so by-passing Poland and the Baltic states completely.

In his first speech as president last week Lech Kaczynski said that one of Warsaw’s main foreign policy goals was to improve relationships with Moscow, but the gas shutoff has not been a good start to the year.

In a related development, Gazprom has finally wrestled control of a Belarusian pipeline that transports 10% of Russian gas to Europe from the state-run Beltransgaz. In retirn, Belarus will continue to get its gas dirt cheap.

The Herald Tribune reports:

Gazprom said in a statement that it would sell gas to Belarus for $46.68 per 1,000 cubic meters, or 35,300 cubic feet, while Belarus will charge Gazprom transit fees of 75 cents per 1,000 cubic meters per 1,000 kilometers, or about 620 miles. Gas sells in Europe for more than $210 per 1,000 cubic meters, and European transit fees are nearly $2.30 per 1,000 cubic meters per 1,000 kilometers. Gazprom has said repeatedly that it is planning to end gas subsidies to former Soviet states.

Alexander Ryazanov, deputy chairman of Gazprom's management committee, said Belarus had been given a special offer "because Russia and Belarus were in the process of establishing a common union state, which implies using common standards when drafting financial and economic parameters of the two countries."

So Ukraine had been warned that it would loose its subsidies and what would happen if it tried to stand up to Putin.

It also shows that Ukraine is going to pay for President Yushchenko’s cuddling up to the West.


Pan Emigrant said...

The news agencies out there don't seem to be giving us the detail we need to understand the story. For example, I'm having trouble finding out why Ukraine was negotiating its gas prices in the first place.

State-level gas delivery contracts are usually set up to lock in the price for many years. If Ukraine has a contact of any worth with Russia, it should be waving it in the air at this point.

Either the Russians have torn up the old contract or it has simply expired. The assumption in the English language media is that it's the first but I'm not so sure.

Pan Emigrant said...

Also, at the risk of sounding naive, what do you think Russia gets back from its multi-billion dollar gas supply subsidy programme from the likes of Ukraine and Belarus?

While I'm not fan of the Kremlin's clumsy geopolitical fumbling, it is tempting to see it Putin's right to up gas prices to Ukraine. If, for example, Slovakia were to leave the EU, it would be of no surprise that it would stop receiving money under the common agricultural policy.

Looking at all this through rose-tinted spectacles, whatever economic hold Russia has on Ukraine through the gas subsidy should come to an end. One less thing for the Kremlin to hold over their heads.

Pan Emigrant said...

My mood is growing sour. Let's all sit back and watch European taxpayers chip in to build Gazprom another pipeline through the Baltic after this...