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Gazprom-Ukraine - Jan 8

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Gas emergency declared across Europe

Staff, Times (UK)
Governments across Europe declared states of emergency and ordered factories to close as Russia cut all gas supplies through Ukraine yesterday in their worsening dispute over unpaid bills.

José Manuel Barroso, the European Commission President, accused the two countries of taking the EU's energy supply “hostage” amid a cold snap across the Continent, and urged them to reopen the pipelines immediately.

Schools and factories were closed and trees were felled to keep home fires burning after Russia turned off the gas taps to more than a dozen countries. It was a clear demonstration of the dependence of the Continent on Russian gas supplies.

Despite temperatures as low as minus 27C and the threat of heating cuts to millions of households, Moscow said that it had no choice but to cease supplies because Ukraine, the country through which 80 per cent of Russian gas bound for Europe flows, had closed its pipelines. The claim was denied by Kiev.
(8 January 2009)

Ukraine and Russia: The Role of a Middleman

Steve LeVine, Business Week
Russia has prickly relations with several of its neighbors, but all pale in comparison with its friction with Georgia and Ukraine. Last August, the former resulted in a full-fledged war, and pessimism about the security of the U.S.-backed oil and natural gas corridor connecting the Caspian Sea with the West. Now, the latter — Russia’s long antagonism with Ukraine — is provoking a similar recalibration of energy security, this time about natural gas supplies to Europe.

I have pointed out the pricing dispute that’s raised the temperature between Russia and Ukraine. But Ed Chow, whose activities in Russia on behalf of Chevron in the 1990s I recounted in The Oil and the Glory, thinks something more is afoot. Namely, Chow thinks the issue separating the sides is at least partly who personally stands to gain from a new deal.
(7 January 2009)

The Russian Bear?

Euan Mearns, The Oil Drum: Europe
... Conclusion

Russia has been a reliable long term energy supplier to Europe and will likely continue to be so for the foreseeable future. At the same time, Russia has rights to maximise returns on its main asset which is energy.

When Russia and Ukraine go through their annual ritualistic gas spat, analysts should begin to question Russian ability to supply peak gas demand in the dead of a cold winter.

It seems that Russia is ultimately aiming to have the EU countries pay for the gas borrowed by Ukraine in leu of transit privileges. This will lead to Russia receiving full market value for gas exports and rising energy costs in Europe that will of course lower demand making it easier for Russia to meet its export obligations.
(7 January 2009)

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