Saturday, December 31, 2005

More commenter analysis

Here's some more analysis from a commenter who signs himself LEvko. It belongs up here:

The Ukraine-Russia gas crisis is part of a trial of strength in the wake of Kremlin's humiliation during and after last year's Orange Revolution - "The Empire Striking Back?"

Putin's Kremlin has rather overplayed its hand so early in this poker game
- Western European countries are already getting anxious about their gas supplies.

A piece in today's 'FT' on the gas crisis states: "The Austrian government
on Wednesday attempted to calm fears of gas shortages across Europe as Ukraine's fuel and energy minister arrived in Moscow for emergency talks aimed at finding
a solution to a row over prices that could see Russia cut exports. Martin Bartenstein, economics minister, said ensuring energy supplies would be a priority of Austria's presidency of the European Union from January 1. "Europe needs more investment and greater diversification of its energy sources," he said.

Suez, the Franco-Belgian energy group, said the dispute was an "alarm bell" for Europe's politicians over the risk of becoming too dependent on Russian gas imports. Gerard Mestrallet, Suez chief executive, said: "Geographical concentration of supply at a time when our dependence is growing does not set the stage for prices to ebb from the high levels they have reached in recent months.

"Echoing these sentiments, the German Embassador in Ukraine, in an interview in today's Ukraininan 'Delo' newspaper is clearly sympathetic to Ukraine's plight, considers Gazprom's attitude unreasonable, its ultimatums unacceptable, and suggests gas price increases should be staged. Worryingly for Russia, he says, "..Russia and Ukraine are our partners, and if they mess us about, we will look for energy sources in other places.

"Putin and his Kremlin associates, for it is they who are pulling the strings, by uncompromisingly threatening to terminate gas supplies to Ukraine and recklessly increasing the price of gas from $160 to $230 per Mcm, have nailed their colours to the mast and left little 'wiggle room' in any further negotiations. Any lower figure when a deal is finally done will look like defeat and more loss of face for Putin when dealing in Ukrainian matters.

Apparently if no deal is reached by 1st January, in a propaganda stunt straight from the Khruschev era, some Russian TV channels will transmit live pictures of the theatrical turning off of valves on pipelines supposedly transporting gas to Ukraine.

As in any dispute where goods or services are provided by long-term suppliers to consumers, 'status quo ante' conditions normally apply until agreement is achieved, and then back-dated financial adjustments and repayments made. I suspect that EU Embassadors are beginning to lean on the Kremlin telling them to bear this in mind, and get things sorted.

European consumers, transit countries, and supplier countries whether they like it or not are mutually interdependent and are bound together is this dispute. In my opinion the Ukrainian authorities are doing OK in trying to get as good a deal for themselves as possible, I hope they don't get too cocky. Yushchenko's comments to the press tend to be bland, and [deliberately?] obfuscating, so maybe they won't.

On the internal politics front in the run-up to the VR elections, statements from Yanukovych have been somewhat contradictory. Although he considers $230 per Mcm unacceptable and " a blow below the belt," he blames the current government for this crisis. How it is affecting voters' preferences I'm not sure. It's all most interesting..


LEvko: This is the kind of comment that I would like to see as a blog post. If you have any interest, please contact me and maybe we can get you access to post here.

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