Potential Gas Deal Problems
As a few posters have pointed out (Anthony, LEvko, and Leopolis: thanks guys), the emergency gas deal that ended the crisis last week includes more complications than I had originally posted about.
Some clarity was brought to the debate on January 5, when Tymoshenko leaked the agreement to the public (or possibly her version of it). I have the text in English here, from Ukrainska Pravda and translated by the Ukraine List. You might also take a look at this breakdown of the numbers from SigmaBleyzer that I just got from the Action Ukraine List.
I'll let y'all go take a look at it for yourselves and when you're done, you can come on back if you're still interested in discussion.
...
Back again? Ok.
The issues raised by this document which I wasn't aware of as of the last entry:
- Agreement Seems to Only Hold True Through June: As near as I can tell, this agreement, and the $95 price, seem to be in force for six months after the signing on January 4. That means that, come June, both sides will need to renegotiate. It also mentions that the transit cost of $1.60 is theoretically good through 2011, though Ukraine is certain to make raising that rate part of any new agreement.
- Ukraine Legally Locked Out of Direct Negotiations With Other Suppliers: This seems to be the main point of contention for the Eurasia Daily Monitor, as espoused in this new article, and their related item on the view from Kazakhstan.
- The Deal May Involve Some Barter After All: Another recent EDM article discusses how the transition to cash payment espoused in the new deal may not be complete. I said in the last entry that cash transactions beat barter transactions because they are more transparent. If the new deal will, indeed, include some barter, that's a setback.
Still a Good Deal?
Well certainly with three new problems or potential problems, the deal isn't as nice as it looked to me last week. But I will repeat that Ukraine has been getting Russian gas at a discount and letting its industry become painfully inefficient. Countries hardly ever use favorable trade arrangements to prepare for the future, and Ukraine didn't either, its infrastructure remains inefficient. No matter what agreement went down, it would be uncomfortable and painful. A price of $95 through June is bearable pain. I just hope the politicians make headway on solving the efficiency problem after the inevitable downtime in the run-up to this election.
Tymoshenko (joined by Yanukovych) Spearheads Vote to Sack The Cabinet
So Tymoshenko and her party, with assistance from Yanukovych and the Regions of Ukraine crew, pushed through a measure calling for the Cabinet to be sacked, austensibly due to a failure to protect national interests in the gas deal.
Should we be surprised they proposed this? No, of course not. Tymoshenko called for the government to be sacked if no agreement was reached by January, and it was a foregone conclusion she would consider any reasonable agreement an impeachable offense.
Does the action carry any weight? As of January 1, Yushchenko no longer has the legal ability to choose the Cabinet, but Parliament won't get it themselves until March. So they're doin' the limbo until then.
Theoretically the Cabinet should be able to muddle on until March, but that's not guaranteed.
Dan McMinn
in 01) Economics and Finance, 02) Foreign Policy - Russia, 08) Oil and Gas, 10) The Cabinet, 11) Tymoshenko - Bloc Yulia Tymoshenko, 16) Opposition, 31) Mar 2006 Parl. Election
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Reader Comments (37)
No, I did not speculate or declare victors in this conflict for a reason: it didn't make sense to me with information I had available to me and it still does not make sense to me now. If you're asking me what my opinion is? Gazprom lost in that they did not achieve their stated objective - $230 USD, but only because they were restained in a) obligations to their European partners whose deliveries were held hostage and b) Putin got what he wanted, namely the act of theft of European gas and 50% price hike in Ukraine. So I think overall Ukraine won the conflict by holding Europeans hostage and bartering the price down to $95, but the Orange Regime is the overall biggest loser because bar-brawl politics are unsustainable either in domestic or foreign policy - and everything thats been happening in the past 2 weeks has confirmed this view.
Regarding Yanuk? Dan, come on, we are all grown ups here. I never have and never will defend Yanuk on the grounds of 'business transparency' or 'tax fidelity' or a viable Kuchma alternative (see my comment to Leo about Kuchma). What I do have a problem with is bringing in democratic demagoguery to differentiate Kuchma's former PM from Kuchma's former central banker (with Kuchma's former gaz princess floating between the two depending on the season) - which happens to be one of your trades. 'Democracy' is not one my concerns, at least not when it comes to the subject of Ukraine. The only grounds on which I can and will defend Yanuk is Ukrainian national interest which would have been much better served under his rule. Sorry but OR has yet to live up to even one of its promises and in one year it has accumulated massive debts, which it counterbalanced with a hefty inflation, and done irrepairable damage to Ukrainian economy with a sale of Kryvorozhstalj. The Orange Goblinoid is the very worst out of all less than ideal political choices available to Ukraine and it pains me to watch him portrayed as a Savior.
One more thing, gas prices have nothing to do with efficiency. Belarussian industry is terribly efficient as a cursory look at its trade balance reveals. In Ukraine most gas profits from subsidies go to Naftogaz, not its industry. And most of the products that are produced by its heavy factories are sold on Russian market for subsidized prices. So when you say that Ukrainian industry is 'painfully inefficient', what you really mean is that Yuzhmash rocket engines for Topol-M ICBMs have no market value, hence, Yuzhmash should be sold for scrap metal i.e. exchanged for little green papers (dlw's suggestion).
The following sums up the deal: 'For seveval months they did nothing, then for weeks bluffed about a lawsuit in Stockholm. But ended up with a purchase of several months for their own pre-election campaign.'
dlw
http://www.jamestown.org/edm/index.php
It sounds like it would be a guarantee of stability for Ukraine.
It'd be interesting to hear how Yanukovich would respond to this favor given to Yuschenko from his former supporter.
dlw
I figure if such a proposal were made and was popular enough that it would be adopted by the other candidates and maybe eventually by Russia as a means to ensure that its growing oil wealth is distributed slightly more evenly among its people.
dlw
Russia already has a stability fund and a hefty gold reserve to back it up, which is being used to fund 'national projects'. And you know what the problem is? They don't know how to spend it without driving up inflation. Handing out gryvnas will do what? Ukrainian whores charging more for their services? .
The Alaska Permanent fund has the dual purpose of reducing poverty and safeguarding the money set aside from it's oil wealth from raiding politicians. But this depends on it's democracy and so in retrospect I doubt that it would work as well in Russia.
The income transfer would tend to make labor more expensive, causing some cost-push inflation. The extent venders would get away with charging higher prices would depend on the degree of monopoly power they have.
I don't know if Putin would do such a thing, but it might be a decent publicity stunt meant to increase his popularity with Europe. There'd be some inflation, but average real income levels would likely rise.
dlw
Ukraine does not have Alaska's oil.
The monopoly of power that Ukrainian whores wield will stay the same.
If its about publicity stunts and European popularity, who needs economics?
dlw
I'm sick of hosting you. You obviously don't care about Ukraine as a nation and your views are repulsive. I will be banning you in two days, after you've had enough time to see this message. Comment if you wish.
A bit harsh no?
Especially considering your blogging friend Veronica's earlier crude referencing of Paul Klebnikov being dead.
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Toynbee:
Perhaps we (you) can tone it down a bit.
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All:
Where I come from, one is at least given a first warning on such a issue.
Like I said, I was going to get skewered for it. Censorship is a predictable knee-jerk response.
What amazes me is that you manage to combine it with lazy anti-intellectual demagoguery about Ukraine coming from California - out of all the places! You claim to be championing Ukrainian interests, yet you yourself are an internationalist. You have the daring to offer political advice, yet you absolve yourself of any responsibility because 'it the precedent that counts'. You preach 'democracy', yet you support ethnic nationalism in a country with two peoples of single faith. Finally, you want to shove 'democracy' down Ukrainian throats regardless of whether its good for them or not. With credentials like these, you'll make a very good censor yet.
See: http://www.rusjournal.com/averko1106.html
Toynbee's banned because I'm sick of listening to him talk about the "monopoly of Ukrainian whores". It is an indicator of a wider distain that I allowed while I had enough patience to do so. I ran out.
Toynbee: "You have the daring to offer political advice, yet you absolve yourself of any responsibility because 'it the precedent that counts'."
I vouch for everything I have said here, and all of it remains here. I believe that the precedent of allowing Yanukovych to steal the election would have been far worse for Ukraine than the political and economic lack of progress that has resulted. That will always be true, and that is why I have highlighted that posting. My name and identity are presented on the site, and I take responsibility for all my words.
"Finally, you want to shove 'democracy' down Ukrainian throats regardless of whether its good for them or not."
I will cherish these words. First because it is absurdist. You cannot enfranchise someone against their will. Second, because it reveals your sympathy for undemocratic government and third because it again shows your condescension towards a Ukraine you believe to be unready for democracy.
If I truly were able to help Ukraine become radically more democratic, I would probably be overwhelmed by joy. Realistically, my contribution will be minor. My goal is merely to explain Ukraine to English speakers as best I can, writing just a little from abroad while I am here, and in hopeful expectation of when my wife and I will return home for good.
Neo-conservatism is a particularly American and expressedly an internationalist movement.
Dear Dan
The subject of Ukrainian whores came up in my conversation with dlw's Leninist proposals to 'steal that which was stolen' and exchange it for little green papers. If his policies were followed, Ukraine will have nothing to export other than mail order brides and whores.
Today, Ukraine does not have a functional state. It does not have a Cabinet. Its executive branch is a puppet Goblinoid. Its legislative branch is divided into three camps that ally against one another upon convenience. And - a rather convenient surprise - the judiciary has been cleansed under Yushenko so there are no judges to offer legal support in this matter. This end, Dan McMinn, you have helped to create. Except for some fingerpointing at Russia/Putin/Russians, you have yet to express any remorse for your political choices. On the contrary, you continue to provide weekly apologies for the current state of affairs.
If absence of a functional state is your idea of democracy, then who needs politics? Mob rule can decide everything. Especially if it is an Orange mob.
Please expand on your apparent disagreement with me on neo-conservatism.
Once again, to me it's the anti-thesis of being an internationalist. On par with my perception of Dan, who wants to limit the commentary of Russia here. A problematical desire seeing how many in Ukraine have a Russocentric outlook.
If you notice, on foreign policy matters, neo-conservatives are less likely to take into consideration the views of others they're opposed to.
Dear Dan:
If anything, the Orange folks "stole" the election with their well entrenched supporters serving as "monitors."
Over 40% of Ukraine's citizenry aren't that stupid to have voted for Yanukovych. Remember also that Kuchma was nominally allied to Yanukovych during the first two attempts at electing a president. Wrong-doing by Kuchma doesn't necessarily equate with a simultaneous wrong-doing on the part of Yanukovych.
Do you know of an Alexander Sich? Not a particularly mellow person as per some of his comments at:
http://www.russiablog.org/2005/12/ukraine_still_refuses_to_pay_i.html
I am not understanding the question, or rather I am not understanding your definition if you gave one. Neo-conservatism assumes that democracy is good and that America's purpose is to spread democracy i.e. America should be sacrificed at the altar of democracy. In practice, it ends up being destructive neo-imperialism, such as the case with Ukraine.
I MUST refute the following quoted statement, which you made "Realistically, my contribution will be minor..."
Au contraire mon ami! Your contribution has and will be of the greatest importance!!! As evidence I submit the number of comments posted to ur site! Do u realize HOW MANY sites never have even a single comment ever posted? WHY do you suppose that SO many auteurs have tried to "hijack" your site via the comments section ?????????
Because you are making a major ripple in the web-sphere! NEVER doubt it for a moment!
Viva Dan! Viva!
Dan sure does. My blog structure sucks. However, my mass e-mail versions of it (a recipient list closing in on 400) make a great splash among officialdom and non-officialdom alike. I have the feedback to prove this.
On the other point, neo-conservatism isn't as internationalist as it is imperialist.
Agree?