The Gas Crisis and the Ukrainian Election
I make the case that it won't ultimately help Yanukovych
The gas conflict with Russia continues to broil on. Now the winter break is here and, as the situation stands, Ukrainians could be looking forward to having their gas cut off this New Year's. Which would be a very bad sign to all those out there who believe the old Ukrainian superstition that the way you begin a year is the way the whole year will progress.
Tymoshenko has weighed in now to say that, in the likely event that the government does not reach an agreement with Russia by January 1, the Cabinet should resign. This is some pretty mean-spirited political positioning ahead of the March election, and I am disappointed to see Tymoshenko using it (as Zerkalo Nedeli was before me). I seem to recall her playing a major role in fomenting a gas conflict in July. Then she was the populist PM working for Ukrainian voters by trying to impose price caps on evil Russian businesses trying to charge Ukraine "unfair" prices. Yushchenko had to come in then and rebuked her for her obviously economically-unsound policy. He then put the prices back at market levels and the problem went away.
Now that she's in the opposition, though, it is not the Russian government's but the Ukrainian government's fault that prices are going up. For shame!
Grinding On
Zerkalo Nedeli recently came out with a great analysis of this situation, translated into English (including a criticism of Tymoshenko). I like how they dish out the blame to all participants.
To Russia:
It is naive to think that Russia’s move is aimed exclusively at patching the hole in its coffers. Vice Prime Minister of Defense Sergey Ivanov said, “In my opinion, sometimes we don’t formulate our policy in relation to different CIS countries clearly enough. And we act too irresolutely when it comes to our economic influence on those countries’ attitudes to Russia.” According to ZN’s information, Lavrov promised at a closed-door session of the Duma to employ “all available means of economic pressure” on the “disobedient” neighbors. Natural gas and oil, which the Kremlin justly views on par with nuclear arms, is supposed to be the main diplomatic means.
To Yushchenko:
Now, where is Yushchenko’s party Our Ukraine? Why is it still silent? Are the national democratic forces following their leader’s advice “not to politicize the negotiating process?” That is a very good screen for certain “friends” of his, who make money on shady deals with Russian businessmen. The gas deadlock is also another opportunity for them to “drown” Tymoshenko. The impending doom does not seem to worry them much.
To Tymoshenko:
Roman Bezsmertniy, campaign chief of staff for Yushchenko’s election bloc, says that Tymoshenko’s demand to sack the government unless it signs a contract with Russian natural gas suppliers by January 1 is a stab in the back. He is absolutely right and his patriotic statement demonstrates very clearly which Tymoshenko is more concerned about: her problems with Russian prosecutors or her country’s national security.
To Yanukovych:
The Party of Regions demonstrates utter near-sightedness. Supposing Ukraine fails in the negotiations and the price for Russian natural gas goes up fivefold. This defeat may be fatal for Yushchenko: the critical mass of his errors will drag his team to the bottom in the parliamentary race. Subsequently, Yanukovych and Akhmetov will win, securing a majority in the future parliament, which entitles them to form a government. But the economic impact from the gas price rise will crush their government in a mere six months. Besides, the Party of Regions represents the interests of big financial-industrial groups and its electorate is concentrated in the heavily industrialized regions of the country, which will suffer from these price hikes more than others. In view of such prospects, it would be logical to help the government stand its ground in negotiations with Russia. It is in their interests to secure the terms of the new gas supply contract, under which their chemical and metallurgical plants would profit. But do they move a finger? No. Obsessed by their mania for power, they are ready to victimize thousands of people employed at their factories, not to mention the entire country.
Blame dished out to all, and fairly, I might add.
Guessing About the Public Opinion Response
I haven't gotten any really good public opinion numbers yet. I'm very curious to see whether or not the strong-arm tactics by Russia will work. Will Ukrainians respond more sympathetically to the Russia government's argument (that this is a purely economic move, and that the Ukrainian government is being obstructionist) or to the Ukrainian government's argument (that the Russian government has hiked the price unreasonably quickly, and this is part of an attempt to damage Ukrainian politicians it doesn't like ahead of the Ukrainian election).
ZN seems to think Ukrainians might side with the Russian government, or they would not have worded their condemnation of Yanukovych in that way. Even so, I'm going to go out on a limb and predict that pro-Russian candidates (Regions of Ukraine and the Communists) will do less well with the oil crisis than they would have done without.
Of course they're still going to have a good showing, even in the rerun in 2004 Yanu got 40%, but this escalation of antagonism won't help. Please hold me to this prediction, I will try to make reference to it after the election is over.
Why do I think this confilct will turn Ukrainian opinion against Russia? Four reasons:
- When was the last time threats of dire economic reprisals from Russia began circulating? During the Orange Revolution. It didn't work then.
- Yushchenko's popularity, and that of his party, has fallen precipitously since the last election, but if there's one thing that revives the popularity of a politician, it's a threat from outside. I just can't believe that, should Russian Gazprom flick the switch on the nation in the middle of New Year's celebrations, Ukrainians will ultimately feel sympathetic to Gazprom's reasoning.
- Tied in with the last point, I think the rising antagonism from Russian citizens towards Ukraine (they very clearly see this problem as Ukraine's doing) will not help gain Ukrainian support. It will be easier for Ukrainian citizens to feel confrontational and antagonistic if they think Russians are behaving similarly, and this budding antagonism will partly displace their frustration with their own government.
- Tymoshenko got herself a little ratings boost with her blatantly anti-market attempts to fix low oil prices in July. Ukrainians, as with voters in much of the world, are not particularly altruistic about supporting solid free-market economic policy that hurts their interests (for the most part, the price hike proposed by Gazprom would bring prices charged to Ukraine up even with those charged to Western Europe, not single Ukraine out for unusually high prices).
Ultimately, above any of the previous items, I think Ukraine will respond negatively to Russia as a result of this crisis because the Russian government has underestimated the strength of national identity in Ukraine. I am especially confirmed in this belief because many commentators have underestimate Ukrainian national ideantity, and I am one of them. I underestimated Ukraine just before the Orange Revolution. I came back from observing the election with the OSCE with my wife, and we both thought that the nation would just muddle along. Instead, Ukrainians showed us an amazing amount of dedication to their nation and democratic principles. I'd never heard such nationalism under Kuchma, just like I'd never heard the national anthem sung with such enthusiasm.
That is why I expect that the strength of Ukrainian affiliation to national identity will prompt them to take the side of their own government (despite their misgivings) rather than take the side of a foreign nation against their own.

Reader Comments (39)
Washington post is at the forefront of neoconservative agitprop and op-eds like that are part of the problem. As I said before, its only fair that the buyer pays. The Orange regime is a pet project of Great Gamers; instead of wasting spit and foam on Russia, Yushenko should bill his employers 'a maintenace fee'. Or has US Treasury ran out green ink and paper?
Taxes or, in EU's case, the 18% VAT does not go to Gazprom, it goes to the coffers of EU member states.
For exact EU tax figures:
http://europa.eu.int/comm/energy/oil/bulletin/2005/duties-taxes-2005-08.pdf
Compare German end user prices to US end user prices at:
http://library.iea.org/Textbase/stats/surveys/mps.pdf
High prices in EU reflect American/British monopoly over the oil market. Let just say its one of many benefits of maintaining an Empire
thankyou for the links. It proves my point that the "free-market" prices prevalent in Europe are due to smart taxes that capture a good deal of the value of oil, driving down the ex-tax oil price.
It seems that Russia now wants to wield de facto economic-political dominion over Ukraine by charging Ukraine European-level prices.
You can spin that however you want, but it comes down to a "power, power, who's got the power" tug-of-war that will not be healthy for the region in the long run, inasmuch as it concentrates too much power and power always tends to corrupt and absolute power corrupts absolutely.
dlw
dlw
Note how Dan isn't too upset with the idea of Ukraine paying a fair market price.
His reasoning is clear. He wants Ukraine separate from Russia as much as possible. Going back at least ten years, Anders Aslund is a leading proponent of this.
You think it's okay for Poland and Orange Ukraine to play power politics by influencing the terms of energy transferred from Russia to western Europe? The antics of Kwashniewski and Yushchenko encouraged the Russo-German pipeline.
Like I said previously, I'm still optimnistic that Russo-Ukrainian ties will not spiral downwards in the long run.
I have a hard time understanding what youre trying to get at. Let me put it this way: EU VAT has nothing to do with Ukraine's gas price.
Russia already 'wields de facto economic-political dominion'over Ukraine. With orders ranging from T-90 tanks to Topol M launchers in exchange for subsidized gas, transit charges, and Black sea rent , Russia is an economic lifeline for Ukraine. Neither EU nor US are interested in survival of these industries - except as resources for cheap raw materials. Like you said, its all about power which I suspect is the real reason why the Orange regime knowingly rejects all compromises from Gazprom - they want economic self destruction. That way they please their superiors overseas and play ethnic blamegames with millions of unemployed.
The late Paul Klebnikov (1963-2004) had similar predictions for Ukraine back in September 1996 - civil war and corpses (see "Tinderbox," his piece in the Sept. 9, 1996, issue of the Forbes). But it's him who's a corpse now. As for Ukraine, here's a nice quote from a popular joke: Ne dozhdyotes'.
Your black humor is most inappropriate in this case. Doomsday mongering is not my forte but in case of Crimea, I will trust local Cossack reports over any Western media outlet. Revolutions, if they are true revolutions, come with a human price and my question is whether Western democratic demogagues are willing to pay it? Or will they wash their hands off, just like IMF does when its policies bankrupt yet another nation. Some dogmas must remain beyond question.
Let me restate my position: I am for a strong, sovereign, just, and prosperous Ukraine. But I don't understand how NATO, EU, Soros, and US State Dept contribute to this end. On the other hand, with roughly 30% of former Soviet military industrial potential, I can understand why some circles may interested in Ukraine further and final disintegration - at any price.
Interventions, in the case of import taxes in Europe, that are wise and needed so that we do not consume too quickly our limited supply of oil and the amount of money going to oil autarchs of all nationalities is limited.
Toynbee, Europes' VAT taxes do have a lot to do with why prices are so much higher in Europe relative to Ukraine. And so when you say Russia wants to raise its prices to European "free market" prices then you got to question the accuracy of the language being used to cover for an aggressive geopolitical power-play.
Here's a collection of articles from all over on the matter found at Google News.
http://news.google.com/?ncl=http://www.theage.com.au/news/world/russia-wields-energy-as-political-tool/2005/12/27/1135445573198.html&hl=en
dlw
Please do not get me wrong - I'm not trying to be funny. I'm grateful that silly predictions made by people like you (whoever you may be) and Klebnikov (the so-called expert) have very little to do with reality: Ukraine is as far from bloodshed now as it was a decade ago.
I do not see why one should put any more trust into "local Cossack reports" than into the very scarce stories in the Western media - like everyone else, the "Cossacks" have their own agenda. But, if you do trust them, then you cannot be blamed, of course, for having such a distorted perspective on the Crimean Tatars (or "TurkoTartars," as you call them).
Energy econ 101.
There are three primary energy sources: oil, gas, and coal.
The delivery price for energy sources is set by the markets. In case of oil, its is set by NYMEX and IPE. Coal's price depends on extraction locale. Gas price is set by calculating the alternative of gas and coal. Even though Gazprom has monopoly over gas, it has to compete with gas and coal providers.
End-user prices are a combination of the market price and taxes. Ukraine is getting market prices, not EU end-user prices.
Ukraine has enjoyed subsidized gas since 1991. To put it into housewife terms for you, each year a Russian family gives a TV set worth of gas to each Ukrainian family. Of course, all these 'TV sets' go into a pocket of certain Ukrainian intermediaries. The practical result of these subsidies has been a tumorous outgrowth of an entire clan of oligarchs, the very oligarchs that now make up ranks of the Orange Guard.
Thanks for the explanation. I have to admit I need to become more familiar with energy economics.
I think the issue then becomes one of cream-skimming. I.e., when you charge different prices to different groups based on their different ability and willingness to pay.
Given that there hasn't been a serious change in the income of most Ukrainians, nor their need for gas to get through the winter, I find it hard to believe that such a dramatic price-increase is economically-wise. It sounds more political, given that the price-increases for other former S-Union countries have been less dramatic. And, even if it were necessary, maintaining good political will is pretty important(particularly given the heavily politicized nature of energy markets) and so a more gradual increase would seem prudent.
That is unless the point was to reassert near complete economic and political dominion over Ukraine and that is dicey politics given the increase in Ukrainian nationalism during this past year.
dlw
Almost half of Ukraine is Russian; nobody knows how many hold dual citizenships. The regions that are going to be most affected by this are in the eastern industrial zone, the very areas that voted for Yanukovich - today's only true opposition to the Orange regime. Scorched earth policies are practiced by the losers and it is with a heavy heart that Putin will pull the plug come January first but, alas, it must be done. Better sooner than later.
My only hope is that impeachment mechanisms will still be in place. Given that Yushenko may declare a state of emergency, expanded executive power will thwart any opposition attempts. Once they start stealing EU gas, EUs legal machine will be set in motion. The question is - against whom? The law is on the Russian side, but EUs geopolitical and economic interests are on Ukraine's side. The final decision may very well be up to the European public.
Ukrainians will spoil it for everyone as usual - but after all is said and done, only Russia will take them back.
That was a rather crude reference you made to the late Paul Klebnikov.
Taras Kuzio was proven wrong when he said back in January that Viktor Yanukovych was done as a viable poltical figure in Ukraine. On the other hand, yours truly was proven righht.
Why should Russia subsidize a Ukrainian government which is disrespectful towards Russian interests?
Are you familiar at all with Spengler at Asia Times Online?
He is the best thing I know in Western journalism on the subject of democratic predicament. His essays are at once sobering and disheartening, yet funny and always amusing. What distinguishes him from the rest is his ability to intermix tragedy and comedy in the role they play in the destiny of Peoples. He is very good on classics, Tolkien, Christianity, Jews, Americans, and Europeans.
Orthodox Christianity does not figure in his topic range but Ukraine does.
For Ukraine's future, as well as Russia's, he outlines the most likely, but not an irreversible scenario.
Tonybee: Michael's already gotten this shpiel, but my comment section is not a chat room. I will respond to your comments made about my articles, but I won't host long discussions with Michael about which writers you both hate, Russian internal politics, what you think of Lukashenka and so forth. Those types of comments make it very difficult for me to address comments targetted at site content (they push other comments off the cue), and I therefore won't allow them. This is your warning, the next time, I will delete the comments. (as a qualifier, to make sure this is all clear, the exchange between you and dlw was fine)
Now, where to begin. Nothing to say about my prediction for now. I outlined the reasons for it in the article. If it is correct, I will see if I think I got the reasoning right in April. If it is incorrect, I will mention the fact in April, and try to determine why I think I was wrong. But there's really no point in arguing about my assumptions until we learn whether or not the prediction is valid.
Likewise I will be interested to see what becomes of your predictions for disaster.
"Dan sincerely believes in human rights, free market economy, and Polish/Zbig’s peace activism."
You've got me on the first two, I can't even understand what the last one is. Are you talking about PAUCI or what?
"His current bet/hope is that Ukrainians will come to hate Russians for killing their free market economy by selling them gas at free market prices i.e. inter-ethnic strife between a people of single faith and history."
Sigh. Ok, once more. Raising the rates is fine. Great, good. It goes against current agreements the Russian government has signed, but
1) it makes market sense, and
2) the agreements were as extremely deep discounts that were an invitation for corruption.
not to mention
3) trading deep discounts (Russia sells at bargain prices, Ukraine transists likewise) is an unstable way to do business, somewhat similar to a cartel. I don't like that.
So I am for the rate hike.
What I am not for is hiking it immediately and quickly right before Ukraine's election. This is an uneconomical decision by Russia, because it won't get dependable payment from a country in crisis. This would be an economic issue if Russia was talking about raising rates over a period of a year. (I caught a rumor Putin was making such reasonable suggestions, and if you have any sources, I'd be happy to read them)
Ultimately, "fair" and "market price" don't make sense together. The price that will be charged (without any talk of fairness) is the price that can be charged. That's just capitalism, and I'm in favor of capitalism over the alternatives.
Yet the $230 figure is quite high, even by European standards. Lithuania, which, as a Baltic, is not a close friend of Russia, which is in NATO, and which is close by is charged $160. If Russia could feasibly make money on a price of $230 to Ukraine, then that would be the aim. But I doubt it could, and I certainly doubt it could benefit, economically, from quadrupling the cost overnight. What is clear is that even the threat of raising rates will hurt Ukraine, and probably the Ukrainian government, and that is what Russia is trying to do. Economics are secondary.
Finally, even if Russia does try to throw the country into crisis, it won't destroy Ukraine's semi-free economy.
As for the prices Europe is being charged, it's silly to think the US has some sort of petroleum monopoly. We're talking about a potentially huge pricing problem for Europe exactly because Russia and Ukraine are having a political disagreement, and Russia is overwhelmingly Europe's supplier. The US doesn't even figure into the equation.
Furthermore, we get cheap petroleum at the pumps (which is what your graphic shows - prices to end users; the purchasing cost info on the last page shows that the countries are buying at relatively similar prices) because our government subsidizes oil and Europe's taxes it. It's not good economic policy and I hope we're forced to change, but that isn't a topic for this site.
Final item: I can read Russian, but not Ukrainian. Of course learning Ukrainian is always on the radar, but until Lesya and I get back to Ukraine, (estimate 3 years) I doubt I will devote sufficient effort.
Unfortunately, I read Russian significantly slower than English, and I am only running Orange Ukraine as a one-day-a-week side project these days. The combination of those two means that I go first to English sources, and only after to Russian-language ones. It does greatly curtail my effectiveness, I admit. But when my wife and I decided to move to the US for a year, I announced how Orange Ukraine would probably suffer, while I devoted more of my attention to other things I enjoy, like writing children's fiction.
What I've got, I post.
dlw - Merry Christmas to you, too.
Veronica - Like I said to Tonybee right at the top, we can all wait and see about what happens. I also doubt Ukraine will be Balkanized or anything dire like that. Also Merry Christmas and all the best to you and the hubby.
Feel free to censor my comments, this blog is your property. If it is 'you' that you want me to discuss, so be it. In Michael's defense, the only reason that Russia ever comes into this is because the Orange Regime is seen by some of us as more of an anti-Russian and less a pro-Ukrainian PR stunt. No one denies that US, OSCE, and NGOs are very good at informational warfare. Some of us just refuse to buy it.
On to business, it is a welcome sign to see you fold the ethnic card - for now that is.
First off, there are no price agreements between Ukraine and Russia; prices are renewed on a yearly basis and they would have remained where they were had the Orange regime not proposed a tarrif hike this year. After all Russia was able to agree with the Orange regime for 2005. Once Ukraine decided to declare free market transit tarrifs, Gazprom replied in kind. And this has nothing to do with Parliamentary elections; this happens to be a yearly festivity only this time, there is no compromise.
Secondly, I already pointed out that Gazprom suggested multiple solutions to this problem. Today Putin got representatives from Gazprom and Naftogaz together and personally offered a 3 billion dollar credit to Ukraine, IMF style - with low APR! Yushenko rejected it, instantly at that. That was an equivalent to slap in the face. That was expected for all of us who see the Orange regime for what it is - a puppet oligarchy.
Thirdly, $230 is lower than what Germany and Romania will be getting this year - $265. Lithuania gets a discount because it transits gas to Kaliningrad. Even Georgia - with its color regime no less hostile to Russia than a Ukrainian one was able to argue it down to $110. Yushenko wants $80 and transition time of 5 years, or else! This is as blatant as political extortion gets.
Fourthly, the gas hike is occuring because of general inflation in the oil market. If Europe is going to start having delivery problems, its because Yushenko will opt for the 'african choice' of stealing European gas.
Finally, 80% of Russians (with the number reaching 94% in Moscow and St. Petersburg) support Gazprom's move. Yushenko's has what? 14% public approval ratings? Yanuk has 30% with Yuljka hovering somewhere in Yushenkos 15% terrritory. No one understands why Russia should subsidize NATO, EU, and Hindu steel business. In Ukraine, no one understands why Ukraine has to go West. With numbers like that, the gas hike is the most democratic thing to do.
The remark about Poland/Zbig was concerning you downplaying of geopolitics. Or to be more accurate, your steady piling of that filth into Putin's corner.
You've got the cause and effect backwards. The reason for commenting here at all is because of this perceived anti-Russia plot. And thus the digressions into, for example just in the comment stream to this article: a discussion of Western media response to a Russian government change in NGO registration. Not to mention the "Lukashenko isn't such a bad guy" digression, and the even more off-subject, Lukashenko's Orthodox Theocracy theory.
You say there was no agreement, Yekhanurov quotes from it:
http://www.mirror-weekly.com/nn/show/578/52189/
[Quote]
As a matter of fact there is a contract between Naftogas of Ukraine and Gasprom of Russia on volume and conditions of transit of Russian natural gas through the territory of Ukraine for the period between 2003 and 2013. It is currently in effect. I cannot imagine how a public company bound by contract obligations can refuse to fulfill them. I asked the deputy head of Gasprom, Oleksandr Riazanov, during our negotiations in Moscow on December 19 in the presence of the head of the Russian Cabinet Mikhail Fradkov: “Is the contract effective?” And he said: “Yes.”
- Then why do the Russians say that they will stop contract supplies of gas to Ukraine on January 1, 2006?
- One can always find a reason to make a statement. But in article 14 of this contract it is clearly stated that: “This contract comes in effect on January 1, 2003… It remains effective until 10 am on January 1, 2014.” And one more thing: “During the period between 2005 and 2009 the Customer (Gasprom) will sell annually natural gas at the price of 50 US dollars for 1000 cubic meters, which is not subject to change by the parties, from the gas transportation services of Russian natural gas through the territory of Ukraine to ensure the gas balance of Ukraine.”
[end quote]
In the same article he responds to the "Ukraine suggested this itself" argument.
So I guess the next question is what sources are you quoting?
Gazprom offered: "lowering of transit tariff, lowering Sevastopol rental, allowing Russian companies to participate in (re)privatization of Ukrainian industry."
The only one of those that I've heard of is the last, and the way I heard it, Russia wanted control over the Ukrainian pipes, not just participation in market tenders. This would bring up many of the same issues of national sovereignty that the $3bn loan would have, (which you mention in your last posting, and I just read about today). Plus what would the $3bn pay for? It would pay for a rate hike that the Ukrainian government believes goes against contract and is therefore illegitimate.
The "take 150 of every 1000" threat is a low blow, unbecoming of a developed country, I agree. It is petty of Ukrainian politicians to mention it. They do so under the assumption that the agreement holds Russia to $50, and therefore they need not negotiate. (Tymoshenko's position) But if you want to measure "political extortion", Russia isn't the country expected to be put in the most economic difficulty because of the situation. Nor is it the one with an election coming up.
AP on the intractable problem:
http://www.forbes.com/technology/feeds/ap/2005/12/27/ap2415867.html
I mentioned the huge Russian support for a price hike the move already. In this article in fact. I support the hike. I mentioned that, too. Yekhanurov supports the hike, he mentioned it in his interview.
The issue has been, and always will be, about timing. Of course he and Yushchenko are going to try to lowball and make the process slower. Ukraine would benefit. Just as I hope Russia isn't seriously thinking about $230, because higher and quicker benefits Russia. Russia says "fine we'll turn off the tap" to pressure Ukrainians. Ukrainian politicians say "fine, we'll take our percentage anyway". Looks like more dirty politicking to me.
And... Um... what do you mean by information warfare? If you hold to the Wikipedia definition:
http://en.wikipedia.org/wiki/Information_warfare
then you think the OSCE has some sort of master disinformation and propaganda plan, presumably targetted at Russia. That's silly. First off, because Russia is a member. Second, because the OSCE reports solid data, and only you and Michael and the rest of his friends believe the OSCE is wilfully falsifying its findings or pursuing an agenda like the CIS mission does.
That "NGOs" in general have such an information warfare skill is not just far from being undeniable, it's positively laughable. Do you think the Committee of Voters of Ukraine, Reporters Without Borders, Winrock International, and George Soros all get together in big planning sessions?
NGOs are irreconcilably divided into hundreds of thousands of interest groups. If some of them manage to develop a good reputation in a non-authoritarian country, you can pretty much bet it's not because they've been adept at "giving the enemy propaganda to convince them to give up, and denying them information that might lead to their resistance" or "feeding propaganda or even disinformation to one's own population".
Some NGOs may lie and get away with it, but they simply do not have the resources to do so on a grand enough scale for it to rate as "informational warfare". Most have to make do with meeting societal needs not currently addressed or providing valuable information.
Dan, your recent post as of right now isn't taking comments. I'm therefore replying here.
I don't recall Donbas seeking outright secession. Rather, it has been seeking greater autonomy.
You should stop quoting Yekhanurov because I don't want to quote Gazprom. Quotes are not arguments in themselves and Yekhanurov is a pathological liar. Do you honestly believe that Gazprom would freeze gas prices for Ukraine for five years? If you have a Russian attorney or if you can read Russian, I refer you to the following:
http://pravda.com.ua/news/2005/12/22/36935.htm
The $50 dollar price is transit pay i.e. Russia, to cover its transit expenses, is willing to sell gas at a $50 dollar price. The transit sum of 250 million dollars, which Gazprom offers to Naftogaz as advance payment, Naftogaz uses to buy 5 million 1000 cubic meters which equals 5 billion cubic meters. 5 billion covers about 1/16th of Ukraine's gas demand. But this year they decided to jack up the transit price, because the Orange regime wanted to get paid more than 5 billion cubic meters. They went ahead and violated the contract and thats understandable considering that NATO membership requires financial sacrifices.
No one ever said there is a conspiracy meeting. I only suggested that sometimes interests of certain group intertwine. Did John Reed stand for Gulag? No, but he did a great service to the Bolsheviks.
On OSCE - there is no such thing as solid data. There is only selective solid data. Russia is a member but this does not prevent this organization from issuing declarations in support of Chechnyan terrorists. Secondly, OSCE is not 'an unbiased' observer - it has a clear ideological undertone particularly when it comes to elections. As such, it represents a political tool for deciding elections before results are known and violating sovereignty and constitutional transfer of power.
NGOs serve their donors period. 'Non-Governmental' is a euphemism.
If you're looking to expand your source reservoir and can read Russian, I recommend starting with kompromat.ru
Good Ukrainian links can be found at antirev.ru links section.
Analysis: Russia-Ukraine on the brink
By PETER LAVELLE
MOSCOW, Dec. 28 (UPI) -- With hours left before the current bilateral
agreement on natural gas deliveries and transit to Europe end, Russia and
Ukraine face a crisis that could have serious international implications.
Energy giant Gazprom is demanding Ukraine pay a fourfold price increase for
gas deliveries staring next year. Ukraine says this is an exorbitant demand
that is politically motivated.
Three weeks ago, Gazprom wanted a new natural gas contract with Ukraine
starting next year that includes abandoning the current barter system of
payments for gas transportation services. It also demanded Kiev pay a price
for natural gas more in line with the firm's European customers -- $150-160
tcm vs. the $50 tcm Naftogaz, Gazprom's Ukrainian counterpart, pays.
Ukraine said this price increase is out of the question and European-level
pricing should be phased in over the next five years.
Due to what Gazprom calls intentional stalling on the Ukrainian side and
the company's renegotiation of gas contracts with other former Soviet
states, the price was later increased to $230 tcm. What was colloquially
called the Russia-Ukraine "gas war" of words now is interpreted as an
almost literal conflict. Gazprom has the upper hand in the dispute, but
Ukraine does have considerable wiggle room.
In 2004, Ukraine's natural gas consumption exceeded 70 bcm while domestic
production was 20 bcm. Gazprom covered part of this deficiency by providing
Ukraine 29.2 bcm as payment to Naftogaz for transportation services.
Ukraine's competitive advantage in dealing with Gazprom is its location.
The firm transits its natural gas through Ukraine to sell in other foreign
markets. Naftogaz is key to Gazprom's international operations and this is
the leverage Ukraine has in any agreement over the price it pays for
Russia's natural gas, as well as transit fees.
Gazprom's dependence on Ukraine is almost absolute. It earns most of its
income from exports, and its main export route runs directly across
Ukraine. Naftogaz has an extensive network of pipeline corridors that end
in Europe. Gazprom shipped 138 bcm of its total European exports of 153.2
bcm through the Naftogaz pipeline system in 2004. Gazprom pays Ukraine a
transit tariff of $1.09/mcm/100 km and has proposed $1.75/mcm/100 km.
Ukraine is demanding an increase to $3, which would essentially cover the
cost of the country's imports from Russia.
In an effort to go around Ukraine, Gazprom plans to build a pipeline that
will link the Russian port of Wyborg and the town of Greifswald, Germany.
It will initially provide gas to Germany, and offshoots may subsequently be
built to link it with several other countries, including Britain. The
pipeline is forecast to deliver 20 bcm of natural gas a year, a trifle
compared with its present total export regime.
Ukraine's leverage in these negotiations has become a political issue in
the country's parliamentary elections scheduled for March 2006. President
Viktor Yushchenko has no choice but to be reminded of what he said during
the Orange Revolution last winter: Ukraine should have economic relations
with Russia based on market principles, while protecting the country's
economic sovereignty.
Yushchenko's position is clear.
How his political opponents are approaching the dispute is odd at best.
Former Prime Minister Yulia Tymoshenko, who was nicknamed the "gas
princess" on the back of allegations she was involved in shady deals that
included acquiring and reselling natural gas transited through Ukraine, has
offered to act as intermediary. It is doubtful Yushchenko has any interest
in promoting a political opponent in this critical issue. Gazprom certainly
is not interested in dealing with Tymoshenko -- Russia's prosecutor general
closed a criminal investigation against her on Tuesday only because the
statute of limitations expired.
Former prime minister and presidential candidate Viktor Yanukovych's
position on the deadlock verges on the bizarre. He has supported the
Russian side in this conflict, though his supporters in the east of the
country would be hit hardest by the price increase.
What is really in play and how will this conflict be resolved?
First, most of the talk and bitterness about the negotiations have come
from the companies most involved -- Gazprom and Naftogaz. When Gazprom
announced its new price demands, politicians entered the fray.
Presidents Vladimir Putin and Yushchenko have sought to cool tempers.
Putin's statement that the gas dispute should not hinder Russo-Ukraine
relations appears to be directed to Europe to apply pressure on Ukraine to
compromise. In the end, neither president has an interest in offending
Europe -- Gazprom's most-important customer.
The second issue is how this dispute is perceived by the other former
Soviet republics that import Russian natural gas. The drawn-out
negotiations with Ukraine have sent the powerful message the days of cheap
Russian natural gas are coming to a close. Moldova, Georgia and the three
Baltic states -- and even Belarus -- have watched the spat closely and come
to the conclusion playing hardball with Gazprom is a losing proposition.
Third is the issue of control over natural gas pipelines. The issue that is
making the headlines is natural gas prices, but the subtext is management
and ownership of pipeline lines transporting Gazprom's gas. The company is
offering to accept stakes in Ukrainian enterprises -- in particular the
country's natural gas transportation network -- instead of cash payment for
natural gas. Gazprom appears interested in acquiring control over the
remaining parts of the Europe-bound gas transportation network, even
accepting a price of $46.68 per 1,000 cu m from Belarus last week after
Minsk agreed to hand over 50 percent of its gas transport company,
Beltransgaz. This issue, of course, is delicate for Ukraine -- pipelines
are the country's most important card in this dispute.
As the clock ticks away, Russia and Ukraine remain at loggerheads. Gazprom
has repeatedly stated it will turn off the taps at 10 a.m. Jan. 1 if there
is no new agreement. This could happen, but for only a day or so as a way
for both sides to prove a point. However, an agreement is inevitable and
everyone involved know this. What is most likely to happen is an initial
three-month agreement to conclude negotiations. This will calm passions in
two ways. The conflict will be removed from the center of Ukraine's
parliamentary campaign and allow a more business-like atmosphere to
dominate the talks. All parties in the gas war have made their point, now
consumers expect a deal.
Peter Lavelle is Moscow-based and a political commentator for "Russia
Today" television.
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Note PL's characterization of Yanukovych's stance on the current energy spat. PL is slated to be a main point of discussion at the next ARR.