Monday, January 12, 2009

A response to Russia vs Ukraine

I got a response from a Russian friend on the Ukraine and Russian gas dealings. Very cogent.

This is what I’ve read in RU net about Russia/Ukraine gas confusion.

* Ukraine owes Russia $2B for the gas delivered in 2008 and did not pay on time, but it certainly would, that is not the issue.

* Ukraine and Russia do not have agreement signed for gas delivery to Ukraine in 2009, while EU transit contract is ongoing.

* Political situation in Ukraine is ridiculous, there is confrontation between its President Juschenko and Prime Minister Timoshenko. Their battles are well-known, and now they are even more embittered as they are preparing for the next year election.

So, why gas? Gas is a big chunk of money when it goes to in-house distribution. Especially in current economic situation when Ukraines ’ metallurgical (leading) industry went deeply down.

In 2006 the same conflict was resolved by establishing a new agent company RosUkrEnergo which was between Russian supplier Gasprom and Ukraine distributor Naftagas. The biggest stakeholder of RosUkrEnergo from Russian side is Gasprom (50%), the biggest stakeholder from Ukrainian side is Dmytro Firtash – Ukranian citizen linked to President Juschenko

What happens now is that, yes, Russia offered $450 per 1000 m3 of gas to RosUkrEnergo, which is close to the going market rates, as Putin does not want to support anti Russian politics of President Juschenko. RosUkrEnergo refused to accept this. At the same time Gasprom made direct offer $250 per 1000 m3 of gas to Naftagas, which representative is Prime Minister Timoshenko, and she was ready to show up in Moscow on the 31st of December to sign the contract, but Juschenko banned the flight saying that Timoshenko is acting out of her responsibility. So, as I can see, this entire situation is just to put down President Juschenko.

What happened later was bizarre that Russian cutoff stopped all deliveries to Austria , the Czech Republic and Slovakia , following a halt in supplies to the Balkans and cuts to other countries. The shutdown came as the continent suffered temperatures as low as minus 27 degrees Celsius (minus 16 Fahrenheit)! That makes Russia look like unreliable supplier, destroys reputation of Gasprom and makes its business plans to participate in EU gas distribution system a pipe dream.

As long as Russia and Ukraine blame each other for the interruption of gas supplies through Ukraine to Europe , that is no more business, that is politics. And very stupid, I would say. But, if it is not politics and governments of two countries are involved in fraud on the gas deals, that is a crime, which is abound on the Post-Soviet space.

1 comment:

Alex said...

Plus we should remember two important facts. At first, Ukraine will suffer losses because the price for using Ukranian gas pipe didn’t grow proportionally to the Rusiian gas price. Let’s make a simple calculation. Russia pays Ukraine $1,7 for transporting 1000 cubic meters of gas on 100 km. Average distance which is passed by Russian gas by our pipe aproximately 1100 km. Russia transports to Europe at least 110 milliards cubic meters of gas annually. So Ukraine gains about $2 milliards anually. And the lowest European price is $4 per 100 kilometers, so we could gain about $4,7 milliards. Accordingly we can say that Timoshenko complimented Putin about $2,7 milliards.

How much gas could be purchased by these? 10-12 milliards of cubic meters at least. Timoshenko grants Putin more than the 50% of annual gas necessity of Ukraine. Receiving the increasing of prices and Ukraine’s obligation to buy technical gas by own cost, though at favourable prices.