Russia: January 2009 Archives
On Monday, Russia and Ukraine both signed an agreement with the European Union which allows for the resumption of natural gas supplies to Europe. The agreement allows international monitors to be stationed at key pipeline checkpoints in Russia and Ukraine to verify that all gas intended for Europe gets through Ukraine.
This agreement only allows for the transit of Russian gas to European consumers. It does not resolve the existing price dispute between Ukraine and Russia.
An article in yesterday’s Huffington Post poses an interesting theory about the problem between the two countries. The argument goes back to Ukraine getting gas allocations from Soviet planners and expected the same after independence. When independent Ukraine failed to pay Russia for its gas, the supply was shut down, but Kyiv simply diverted gas intended for the rest of Europe.
The article continues by noting that the dispute is more an issue of economics for both countries than Russia wielding a heavy fist. Further, Russia is facing a budget deficit due to falling gas prices while Ukraine’s economic crisis makes it difficult to pay for its gas deliveries.
This agreement only allows for the transit of Russian gas to European consumers. It does not resolve the existing price dispute between Ukraine and Russia.
An article in yesterday’s Huffington Post poses an interesting theory about the problem between the two countries. The argument goes back to Ukraine getting gas allocations from Soviet planners and expected the same after independence. When independent Ukraine failed to pay Russia for its gas, the supply was shut down, but Kyiv simply diverted gas intended for the rest of Europe.
The article continues by noting that the dispute is more an issue of economics for both countries than Russia wielding a heavy fist. Further, Russia is facing a budget deficit due to falling gas prices while Ukraine’s economic crisis makes it difficult to pay for its gas deliveries.
As Russia and Ukraine continue their bitter natural gas dispute, several countries now report a complete shutoff of their gas supplies from Moscow. The countries are:- Bulgaria
- Croatia
- Greece
- Macedonia
- Romania
- Turkey
Bulgaria has sufficient reserves for several days, but President Georgi Parvanov said his country should begin immediate preparations to re-start Unit 3 at the Kozloduy Nuclear Power Plant. It would take approximately one month to re-open the reactor.
Kozloduy-3 was shutdown in December 2006 as part of an agreement with the European Union (EU), which was concerned about inadequate safety levels. However, Bulgaria’s EU accession treaty apparently allows closed reactors to be temporarily re-started in the event of an acute energy shortage.
Varna and Dobrich in eastern Bulgaria have been left without natural gas supplies. In Varna, on the Black Sea coast, 12,000 households were left without central heating amid freezing temperatures.
Russia’s Gazprom is certain it can provide enough gas to Europe, but is attempting to find routes other than through Ukraine, which has been accused of siphoning gas from the pipelines. The Ukrainian government denies the allegations. Russia supplies Europe with approximately 25% of its natural gas, 80% of which is shipped through Ukraine.
Photo: Kozloduy NPP Units 1-4
On December 30, 2008 Russian President Dmitry Medvedev signed into law a constitutional amendment extending presidential terms from four to six years.This law has increased speculation that Prime Minister Vladimir Putin will return as President after the next election. As President, Putin said he would prefer a longer term, but felt it was unethical to change the constitution while in office. Medvedev, perceived by many as Putin’s puppet, proposed the constitutional change six months after taking office.
The bill was rushed through the State Duma, much quicker than most laws. Officials have indicated the extension will not apply to Medvedev’s current term in office, raising further questions about the bill’s quick move through the Duma.
Apparently an anonymous Kremlin advisor has been quoted as saying the reform is intended to return Putin to the presidency as early as 2009. It has been suggested that Medvedev would enact the amendment and several unpopular social reforms. He would then resign and call a pre-term election in 2009. If Putin returns to power for two more terms, he would govern until 2021, allowing him to fulfill the Putin Plan for the social and economic development of Russia.
Once again, Russia has halted natural gas deliveries to Ukraine. The cutoff began at 10:00 AM January 1, 2009 after talks over a new energy contract between the two countries broke down.Gazprom, the Russian gas monopoly, followed through on its threats after Ukraine’s leaders united to demand that Russia pay more to ship fuel to Europe through Ukraine. To avoid panic across the European continent and as a sign of goodwill, Gazprom is increasing shipments to other countries to avoid midwinter disruptions.
The dispute is about Russia wanting to charge higher prices for gas next year and collect over $2 billion in Ukrainian gas debts so far this winter. Ukrainian President Viktor Yushchenko and Prime Minister Yulia Tymoshenko, coming together in a rare display of solidarity, called on Russia to resume talks and continue providing fuel to their country at last year’s prices until a new contract is established. They offered to pay $201/1,000 cubic meters of gas, but also demanded that Russia pay at least 15% more for using Ukraine’s pipelines for gas deliveries to other European countries.
Before the talks collapsed, Russia offered a price of $250/1,000 cubic meters of gas, but Gazprom chief executive Alexei Miller has now stated Ukraine would have to pay $418/1,000 cubic meters of gas in 2009. That is more than double what Ukraine paid last year.
If this sounds familiar, Gazprom cut Ukrainian gas supplies in 2006 after a similar dispute, except that time supplies to the rest of Europe were affected. Also, in March 2008, Gazprom decreased supplies of natural gas to Ukraine until the former Soviet republic paid outstanding debts.
