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Gas crisis: Is Gazprom really expecting Europe to take its side against Ukraine?
Posted by Jerome a Paris on January 14, 2009 - 1:00am in The Oil Drum: Europe
Gazprom says Ukraine blocking resumed gas flows
MOSCOW, Jan 13 (Reuters) - Russian gas monopoly Gazprom (GAZP.MM) said Ukraine was blocking gas flows to Europe across Ukrainian territory on Tuesday. "We believed yesterday that the door for Russian gas was open but again it's been blocked by the Ukrainians," Gazprom export chief Alexander Medvedev [said]
It looks to me that Gazprom seems to be thinking that it had successfully managed to put the blame for the conflict on the Ukrainians, and was trying to push its advantage and finally separate the issue of payment for gas delivered to Ukraine from that of the transit of gas (thanks to the European monitors enlisted to put the blame on Ukraine for blocking further gas deliveries).
But it looks like we're back to square one: the Ukrainians will not accept to pay for the portion of the gas delivered by Gazprom, and will still hold transit hostage to impose that. It will be interesting to see Europe's reaction, but I don't see them taking sides in favor of Russia in this conflict.
I presume that Gazprom sees little downside to this, expecting that this will improve the prospects of its direct pipeline projects like Nordstream and Southstream, but this might be a bad miscalculation.
With the nuclear lobby strengthened in recent years, and wind industry actually able to deliver, it's quite possible that plans to move away from gas-fired power generation could finally take shape and make Europe, for almost the first time, focus on the demand side of the equation.
Gazprom's main asset has been its reliability. Its extended shenanigans in Ukraine (where their case, once again, is rather narrow and weak, altogether) are endangering this a lot more than they improve prospects for additional revenue from Ukraine.
Unless, of course, this is still about the sharing of the behind-the-scenes loot. In which case, Europe might wonder how private interests can hijack the highest decision-making levels of a country for so long...
Earlier coverage:
Gas crisis: Russia caves in as expected
Is Putin losing control?
Russian gas and European energy policy - a reprise
FT Op-Ed: The battle of the oligarchs behind the gas dispute
Ukraine-Russia: some background and context.
Ukraine vs Russia: Tales of pipelines and dependence
Gas crisis: Is Gazprom really expecting Europe to take its side against Ukraine?
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Gas crisis: Is Gazprom really expecting Europe to take its side against Ukraine?
PDF version
86 comments
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Earlier articles on the subject:
2006-07 coverage
Gazprom as a Predictable Partner. Another Reading of the Russian-Ukrainian and Russian-Belarusian Energy Crises (Russia.NEI.Visions working paper, April 2007)
The new gas war (30 April 2006)
Blair misses the protectionism meme (26 April 2006)
UK protectionism threatens European gas supplies (19 April 2006)
European energy liberalisation forbids gas deliveries to the UK! (18 April 2006)
The marketistas want to break Gazprom (22 March 2006)
The 2006 crisis
Washington Times quotes European Tribune (9 February 2006)
My Week in the Media (8 January 2006)
Russian-Ukrainian gas deal - what's behind it? (4 January 2006)
Russian gas cuts - why there is no need to worry (2 January 2006)
Ukraine vs Russia: Tales of pipelines and dependence (30 December 2005)
Earlier texts
A pipeline is like a marriage with kids (16 December 2005)
Russia, Ukraine, Oil, US Diplomacy - All in One (21 January 2005)
GAZPROM'S GOT WEST EUROPEANS OVER A BARREL (WSJ, 8 November 2002)
Fix Gazprom's Fatal Leak (WSJ, 31 May 2002) (item 11 in link)
Some thoughts on Gazprom (30 March 2002)
As the US weakens, NATO stands exposed.
The US still thinks the EU is it's colony.
As America goes bankrupt for all the world to see,
Europe must make up it's mind.
This is not about the surrender of the Ukraine.
RUSSIA WILL FORCE EUROPEAN SURRENDER
http://emsnews2.wordpress.com/2009/01/14/russia-will-force-european-surr...
Just exactly.
Why do you assume Gazprom cares what the EU thinks? The EU has shown a brazen anti-Russian bias in both the case of Saakashvili and Yuschenko. I would like to see how the EU aka NATO, justifies the actions of Ukraine today. Gee, did Ukraine find out about process gas only on Monday and not when it was signing contracts on Saturday? How about Ukraine's obligation to abide by the 2006 gas transit agreements, which include process gas, until the Stockholm Arbitration Court says otherwise.
Yuschenko's regime is blackmailing both Russia and the EU. But the russophobe blowhards in the EU want to transfer all the guilt onto Russia. Bunch of hypocrite whiners.
Hi,
Can someone please explain what transit gas and process gas are?
To my simple mind if there is a pipeline then once it has been pressurised not much further gas is required other than for leaks, is this correct?
Surely it is fairly easy to monitor the amount of gas being input and output?
I am not surprised at anti russia sentiment, it was bound to happen once russia stopped(?) imploding and benefitted from rising oil prices. The US will naturally try to counteract any russian influence in order to protect its position.
The problem is that the Ukrainians sucked dry all gas from the transit pipelines for domestic consumption. The pressure has dropped to zero.
Gazprom knows that Ukraine can't deliver any gas to Europe until pipes are repressurized. It expects Ukraine either buy the gas for that from Gazprom (market price, of course) or use gas from Ukraine's reserves/local production. Ukraine wants that gas for free (see the failed declaration).
Ukraine burns gas running the compressors that deliver the Russian gas supplies to Europe. This fuel is what they're talking about.
Apparently the gas transit contract stipulates that Russia pays Ukraine a flat fee for transit, without reference to the cost of this process gas. Signing such a contract was obviously a pretty boneheaded move for the Ukrainians, but a contract is after all a contract.
OK, so some energy is required to pump the gas, this should be fairly easy to calculate. Perhaps the Eu would be happy to pay this small cost to Ukraine?
Likewise the amount of gas to pressurise the pipeline a one off cost, say it is a 1m square then x length 200km?? = 200 x 1,000 x 1 = 200,000 cu metres or at a cost price of USD 400 per 1,000 cm 200 x 400 = 80,000 USD. Probably need to allow for compression so say 30 times?? then 30 x 80,000 = 2.4M USD = peanuts for the Eu to pay Russia directly for the gas Ukraine has stolen/used.
Or have i got it all wrong??
Obviously it is no good paying the gangster regime in Ukraine because they would be back next week needing another top up.
Transit gas "problem" is obviously used as pretext. Ukraine does not like to have just one contract under control of Eu. It wants two contracts: for transit and for domestic consumption. And with prices adjusted to make gas for domestic consumption essentially free. That's how it was done for years. Russia does not want this - at least not with current Ukrainian government. Why should it subsidize hostile country?
As for "one off cost" - this story goes around and around: Ukraine just takes what it needs from the pipe - and to the hell with the consequences. So this cost will be repeated over and over. This means Eu and Ukraine will be in constant conflict over this gas. And what leverage Eu does have over Ukraine Russia does not have?
My point is that Russia cannot force Ukraine to pay for gas, because Ukraine hijacks transit gas. but if Gazprom can get the EU to put pressure on Ukraine not to interfere with transit, then Ukraine would lose the hold it has over Gazprom.
Gazprom does not care about what the EU thinks, only about how it might indirectly help it get any money for the gas it sends to Ukraine. But that can work only if the EU accepts to blame Ukraine for transit issues, and not Russia (irrespective of how fair or correct either position may be).
Russia sure can. If Ukraine does not pay it will not receive any gas. It's as simple as that. Europe is not involved here at all. Gazprom does not expect Europe to make Ukraine goverment to pay anything. It will deal with Ukraine as any other provider of the gas would. Here in US If I do not pay my bill I get my gas shutoff whether I like it or not. I can make up any stories I wont but until bill is payed I will see no gas. I presume the same is true in other countries as well.
Transit is a separate issue. Europe has been blocking any ways to diversify gas supplies lines and now has nobody to blame by itself. There is not enough interest in EU to restore gas supplies. I say it because:
1.) Despite shortages, it still have not provided necessary permissions to build North Stream.
2.) Despite shortages it has not used any legal means (going to the court) to put enough pressure on Ukraine to let the gas pass.
It looks like the clowns running the EU actually believe they will force Russia to export its gas via Nabucco. What a bunch of retards.
You are Vladimir Putin and I claim my five pounds.
I'd suggest the reality goes something like this:
Russia: Wants to regain what it considers as its rightful place as a world superpower. In doing this it wants to regain a measure of control over at least eastern europe. It's therefore flexing its energy weapon and trying to intimidate into getting others to agree with it, or else. It also needs the cash that higher prices would bring and doesn't like the current depressed state of world trade.
Ukraine: Has little in the way of power, but wants to remain independent from its larger neighbour and realises the transit pipelines are a good mechanism. It simply considered any gas going through the pipe as its first, with any excess going to europe. It will pay a little cash for the gas, but as for market rates, forget it.
Europe: Considers both russia and ukraine as squabbling children with gangster pretensions. It wishes both would learn the game of international trade and grow up. It also probably thinks it can get the gas via other sources and is metaphorically tapping its foot and wondering when those communist twits are going to learn the customer is always right.
All are probably mistaken to a degree, about the reality and the beliefs of the others. Next step? Blowing up some pipelines.
Dissident is correct.
Russia is not changing the rules of the game as
it wakes up in the morning as the West has been doing
since Khodorkovsky was arrested for trying to sell
YUKOS to XOM.
At this point (!) Russia became the enemy of the West.
The West and the West alone is authorized to pay what it wants, when it wants, with what it wants for however much it wants for
oil/gas.
Anyone else trying this will be shot out of the saddle.
but now the guy in the saddle has nukes, has paid it's debts from
the czar and WWI and II to the Club of Rome and per Georgia
will defend it's interests.
You want confrontation, step right up and pretend that Russia
is Iraq.
Per Nabucco.
Turkey now wants 15% of the gas that transits.
Too bad the EU has been keeping Turkey at arm's length.
the Goeben Redux:
The British did not immediately realize the importance of the Goeben's actions. The initial reaction to the eastward course of Goeben was relief, as the German ship would no longer threaten French transports. The Royal Navy would have, however, one more chance to stop Goeben before it reached Turkey.
Completed in 1912, Goeben served in the German Navy until 1915, then in the Ottoman until 1918. She survived the collapse of both empires and the scuttling of her brethren at Scapa Flow to serve in the Turkish Navy between 1930 and 1954. This thirty year period of active duty service puts Goeben slighty behind some of her contemporaries (USS Arkansas, the South American dreadnoughts), but she played a more important role in world history than virtually any other battleship of the dreadnought era.
http://lefarkins.blogspot.com/2005/03/tales-of-sea-goeben-part-ii.html
What is the real situation in Ukraine? It's behaviour suggests that it actually does not have massive gas reserves in storage tanks as it claims. This would make perfect sense since it has been stealing and re-selling Russian gas for over 15 years. The crooks running the show in Ukraine could not possibly allow vast amounts of potential lucre to sit in storage tanks. So Ukraine literally needs immediate gas supply from Russia to feed its domestic market and has no choice but to steal transit gas if it gets cut off.
Ukraine steals gas because it can - that's the simple answer.
It does have huge storage capacity - but the main use of that storage is to boost Russian export capacity in winter, so that storage is also held hostage by the Ukrainians (the main facilities are located in Western Ukraine, near the Hungarian and Slovak borders, so can almost only be used for export purposes).
As I noted in one of my articles, Ukraine also holds hostage gas deliveries to Southern Russia 5rostov and all the Caucasus region) as the pipeline going there crosses Ukrainian territory.
Those verbs should all be past tense now.
Russia, like the boa, now squeezes with every exhalation.
http://www.rbcnews.com/free/20090113181203.shtml
"He explained that Naftogaz of Ukraine would not be able to accept Gazprom's suggestion for 76.6m cubic meters of gas to be transited through the Sudzha station to Moldova and the Balkans. "The gas transportation system works as a single whole. If we accept this suggestion, we will leave the Lugansk, Donetsk, Odessa, and part of the Dnepropetrovsk region without gas," Dubina stated. This is why the gas is not being directed to Europe, he said, explaining that the fuel had arrived at the Sudzha station, but Ukraine had no technical capability to turn on the valves."
This is a complete load of bollocks. Gazprom knows the workings of the gas system in Ukraine inside and out since it is the SOVIET gas infrastructure that Gazprom arises out of. In the above claim by Naftogaz there is clear evidence that Ukraine cannot supply its domestic consumers from storage.
It still amazes me that the Western press is so passive on the issue. Even when BBC writes something, it rarely makes it to the top 5 stories on their site. Surprisingly, the Oil Drum almost silent too.
Wake up, people. This is the New World. This is HUGE. It's bigger than South Ossetia Conflict. And will have far reaching consequences.
No compromises:
- European Union doesn't want to become the Western Russian Empire. It'll happen if the Russians manage to punish the Ukrainians by Europe's hands.
- Ukraine doesn't have money. They're collapsing. When you're painfully dying, you don't care too much what others think about you.
- Russia doesn't care about all of above. Russia is ready for the New World to come.
Actually Russia offers choice to Europe: either it goes with Russia - or it goes without. In this case Russia will probably go with China.
As for Ukraine - it's just a pawn. Russian offers Europe two deals here:
1. Ukraine is part of Europe - feel free to pay for misdeeds of you "brother nation".
2. Ukraine is not part of Europe - be silent and Ukraine WILL fulfil it's obligations. We guarantee that.
Basically Russia said: enough is enough - either you allow us to use all means (army, nukes, etc) and then we'll take the full resposibility, or not - in this case Ulraine is your problem, nor ours.
Seems fair to me.
Khebab sent this link to 'streetwise professor' who actively is following russian situation.
These are a couple of excerpts from the Streetwise professor:
Much more background supporting these views on the website.
More of the same wishful thinking BS that diseases the western mind. Russia does not have an acute dependence on energy and anyone who claims this is an idiot or malicious. I see western articles trotted out how Russia cannot survive if oil is less than $50 per barrel, etc. These clowns should do some research and look at what happened between 1998 and 2004 (when the oil price was less than $25 and Russian gas was being given away for next to nothing). The new chatter is how the devaluation of the ruble will destroy Russia, again these "experts" should look at what happened in 1998 and the ensuing massive recovery of the Russian economy. I know it is very tempting for westerners to look on the world as composed of a bunch of banana republics, but this is nothing more than infantilism.
Please tell us what happened in 1998. I thought the Russia government defaulted. I can not name one state that purposefully devalued its currency and benefited from his devaluation? It is reported that Russia receives 58% of it's tax revenues from gas sales to Europe. What is the true percentage?
I would ask why it's so unlikely that Europe will blame Ukraine for the situation. It is almost certain that the Ukrainians are deliberately blockading gas exports to Europe in order to squeeze a lower price for domestic gas out of the Russians. I haven't seen anyone seriously question that they're violating their transit contract.
Russia has made many missteps but Putin finally said the right words when he insisted that all aspects of the gas relationship -- sales, transportation, and storage -- between Russia and Ukraine be put on a market basis. Why on earth would Europeans defend a Ukrainian demand to pay significantly less for gas than they themselves pay, especially when so much of it is going to energy intensive export industries (fertilizer and metals) that directly compete against European domestic production?
That said, I agree that Gazprom is suffering considerable long-term damage from the dispute. Were I a downstream consumer, I would lack confidence in future gas shipments from Russia regardless of whether the fault is Russian or Ukrainian.
"Why on earth would Europeans defend a Ukrainian demand to pay significantly less for gas than they themselves pay"
Exactly! so Europeans should subsidise a bunch of gangsters to compete against them? If that is the new rule then i can soon find some racket that is worthy of a generous subsidy.
Ukraine should clearly agree to pay market price for the gas and receive market price for transit. Subsidies remind me of the communist era farmers who fed bread to their animals as it was cheaper than grain.
How much is Europe prepared to pay to guarantee supplies? e.g. build a pipeline to bypass Ukraine? If they are not prepared for this then expect further disruptions every time Ukraine needs a top-up.
It is clear that europe should not be dependent on one major supplier, this will surely lead to greater investment in storage, renewables and nukes.
Those lacking confidence should go and shop elsewhere. They never had any intention of treating Gazprom and Russia fairly. It is not Russia's obligation to bend over backward to please those lacking confidence, especially if they engage in obscene misinterpretations of the facts. If they are not happy then that is too bad for them.
That's EXACTLY why it happened now. The old world order is dying. Russia is no longer believe in globalization. It knows it can not survive alone (well, it can but it'll be difficult and such future is uncertain). So it gives Europe the choice: with Russia or against Russia. If Europe does not feel confident enough - it can go away and live it's life without Russia. There are China and Japan to consider. If Europe wants to live with Russia - Ukraine must be destroyed. May be not physically but as someone who can threaten Europe-Russia relations. Who and how will kill Ukraine as independent force - does not matter. Russia will prefer to do it, but if Europeans are so picky - they can do it too. But in the next few months Ukraine as independent country must be gone.
If Europe lacks the will... well - as I've said: there are China and Japan. They need gas too :-) Not the most pleasing outcome, but stable solution too.
"Why on earth would Europeans defend a Ukrainian demand to pay significantly less for gas than they themselves pay, especially when so much of it is going to energy intensive export industries (fertilizer and metals) that directly compete against European domestic production? "
It's up to the Europe to answer that question. But it needs to make sure that whatever the answer it has it also insures free transit of gas to Europe.
It's silly to read statements that suggest that Russia has an obligation to provide EU with gas while EU is working hard at blocking it. Lets be honest here. The corrupt goverment in Ukraine (with approval rating dipping below 5%) that's been blocking EU gas supplies has been installed there with western support (supposedly that was somehow a more democratic goverment). EU must now blame itself for supporting this government. If that's not enough, Russia has offered Europe to build North Stream pipeline. The only advantage of this pipeline over others is that gas can be send to Europe without any issues. Europe refused. Why would Europe choose not to build pipeline that would guarantee it's gas supply? Why would Europe want to have supply interruptions? Russia certainly does not want these issues and that's the reason why it proposed this pipeline. Russian position is logical and coherent. But I can't understand what does EU wins by having these supply issues? Do these supply issues make Europe more secure and if so in what way?
From an earlier Euan OilDrum: Europe article;
That's from an earlier article of mine - I actually drew that map myself in 1994, from various disparate local sources, when I was trying to make sense of all the newstories on the same topic. THEN I got access to the Ukrainian gas company's own map - I made some A3 color photocopies of their one available color map of that size and was allowed to keep one for myself! I've never posted that color map though (it doesn't reduce well, there's more information than on the above one). But it allowed me to confirm that the map above is basically correct - or was back then, anyway.
I wondered who drew that...good work!
"Here be Dragons"
It should surprise nobody that there is no 'trans-Ukrainian' gas pipeline dedicated to transport gas independent of the Ukrainian gas network which Russia is claiming; i.e. a gas pipeline which starts at the Russian border and runs independently gas to the Ukraine-Romanian,etc. borders.
Who would pay to build such a pipeline in Soviet times?
Russia knew that once their gas crosses the border it is mixed up with Ukrainian gas and is beyond their control even though Gazprom does get paid.
So why the snit-fit over 'stealing'?
It's because the pipeline system weakens Russia's ability to selectively pressure prices to individual customers and it galls them.
The EU has wisely chosen not to increase Russian leverage over natural gas markets.
Gazprom wants to market gas to the Balkans so now Russia is building such a pipeline across the Black Sea. Maybe now the money for that is drying up.
Clearly you have never heard of valves.
Clearly you didn't notice that Ukraine's gas storage uses the same pipelines as Russia uses for exporting gas, therefore to get access to their Ukrainian gas storage they need to use same pipes Russia is claiming.
Your whole thesis is a joke. You think the Ukrainian pipeline system has no regulation whatsoever and only has inputs from Russia and valves in people's homes and businesses and the outlets to Europe. Get real. Ukraine can shunt the gas flow N-ways through its pipeline NETWORK.
Anyway the political BS you are peddling has now been officially exposed. The pipeline pressure on the Russian side of the border is at 75 atmospheres but there is no flow through the pipelines in Ukraine. This has been established by just-created international pipeline commission. Looks like your mickey mouse theory can't fly. Ukraine has valves on its side of the Russian border.
You don't understand normal
business practice.
Whose gas network is it?
Ukraine' pipes s connected up to their cities and factories. Is it reasonable to expect the Ukrainians will Russia to send gas to Russia's customers and freeze themselves? In that case, it would be Russia's pipeline, but clearly it isn't. Use of the Ukrainian pipeline is predicated on the free flow of gas to the Ukraine.
I think you got confused here.
Gas is gas. The problem is not with mixing. The issue here is with volumes.
If Russia pumps certain amount of gas for export it expects the same amount of gas to come out on the other end. Ukraine can mix it if it wants. The issues here is that Ukraine goverment have choose to steal it, thus Russia would pump gas to Ukraine for export and nothing will come out on the other end.
No.
If Ukraine were full of natural gas then you'd be right, but it isn't. It's getting it's natural gas from it's own storage at reduced volumes and it doesn't want to share its Ukrainian stored gas with Russia's customers, while they freeze. Basically if Russia stops exports to Ukraine, Ukraine will automatically stop their exports, etc.
As in business they'll say 'I'll pay you when I get paid.'
This was realized by everybody and is implicit in the gas agreements. That's why there should be arbitration.
Stop making an ass out of yourself. Ukraine is supposed to have several months worth of storage in its tanks. Since the disruption has been only since early this month there is no way that they would not have enough pressure in the pipelines. Ukraine would be using their alleged vast gas storage to feed to UKRAINIAN customers. Your talk about supplying Russian customers indicates you have a lack of any grasp of the situation.
I saw a picture of a Ukrainian gage reading zero pressure. Now show me a pic of a Russian gage reading not 75 atmospheres but actual flow.
http://news.yahoo.com/s/ap/20090113/ap_on_re_eu/eu_ukraine_russia_gas
1. There can be no flow if valve is closed on the other side.
2. Shipments were stopped after no gas come on the other side.
Gasprom clearly is not interested in playing games this time. If Ukraine can only fill the pipeline by stopping factories or buying techinical gas in Russia - it should do so, not play games and shift blame around.
http://top.rbc.ru/english/index.shtml?/news/english/2009/01/14/14121226_...
International monitors have confirmed that Ukraine is blocking Russian gas supplies to Europe.
The members of an international monitoring commission in Kiev - Julius Skach (SPP), Sergei Bazaleyev (Gazprom Export), Peter Zachorski (Estrim), Alain Rossignol (Gaz de France Suez), and Roberto Merlo (EU) – have all signed an hourly report which shows that no gas was being pumped via Ukraine’s pipelines to Europe, while pressure at Russia’s Sudzha station reached 70 atmospheres, Gazprom reported.
A similar hourly report was also signed by international monitors (Johan Haumer of OMV and Gazprom Export’s Oleg Antonov) at the Uzhgorod station.
Earlier, Gazprom received Naftogaz of Ukraine’s refusal to transit gas to Slovakia via the Uzhgorod pipeline. “We have received another refusal from Naftogaz of Ukraine. This time it refused to let Russian gas into its Uzhgorod corridor. We have requested the daily transit of 22.2 million cubic meters of gas, from the Sudzha station to the Uzhgorod station, destined for Slovakia, where the situation is particularly difficult, but Naftogaz rebuffed our request - again,” Medvedev lamented.
As in the case with the blockage of gas supplies to the Balkan region, Ukraine demands some “long-term transit guarantees,” according to Medvedev.
“There is a contract for the transit of Russian gas valid until 2013, and there are monitoring rules signed by all parties; what other guarantees do they want? It is clear to everyone that it is time for Ukraine to make good on its promises,” he emphasized.
Gazprom resumed gas shipments to Europe via Ukraine at 10 a.m. on Tuesday, in accordance with its agreements with the EU and Ukraine. Gazprom delivered the gas to the Sudzha metering station. The company planned to supply 76.6 million cubic meters of gas to the Baltic countries and 22.2 million cubic meters to Slovakia, but Ukraine did not open the taps.
-----------------------
Keep on pretending that Ukraine's pipeline NETWORK has no switching capability. Very schoolyard, very GW denialist. How are the storage tanks filled then, genius.
"This was realized by everybody and is implicit in the gas agreements."
No, the opposite is actually true. There is a contract between Gazprom and Ukraine gas company. The transit was specifically separated from gas sales to Ukraine so that nobody would have these illusions. Ukraine has agreed to transport gas in exchange for a specified amount of money and nothing else. The problem is that Ukraine goverment has decided that it does not feel like living up to this agreement. In effect they act as a lawless state. A state where international laws (such as the one governing that agreement) do not apply and neither Russia nor Eu would be able to force them to live up to terms of that contract. This makes it vital for EU and Russia to build new pipeline as quickly as possible. That might take a long time, but it probably the only solution other then Ukraine goverment changing for the better. You would not want to pipe gas though North Korea and you would not want to pipe gas though Ukraine with it's current goverment. Russia was doing it for as long as it could, but now Ukraine goverment has horrible approval ratings and has nothing to loose.
The other solution would be for EU to pay for Ukraine gas (possibly temporarily until new pipeline is build) and that's what orange goverment in Ukraine is trying to make happen. EU helped this goverment come to power, now it'll have to deal with consequences.
Isn't Russian natural gas production in decline? With low prices right now, and decline coming, they may as well do something like this to not sell gas they are running out of cheaply.
As is the norm, it looks better to have the Russians have this be a political dispute and not a technical "we are capping gas production to make it last longer" sort of thing. And with how people deal with this the former is better than the latter to keep Europe demand up.
Still the Russians may be playing this card too often in the last few years.
There is a theory that Russia just does not have enough gas to export in winter months when domestic consumption is high. Not sure if this holds water though...
That theory originates in Kiev. And this is from Moscow:
Russia Gazprom shuts wells, makes losses in gas row
Is there any news on the remaining UK supplies? We are currently pumping all we can to the EU:
http://www.interconnector.com/onlineservices/historicflows.htm
Yet we were told on Sunday that we had less than 1 week of gas:
http://www.timesonline.co.uk/tol/news/world/ireland/article5489455.ece
Do we all have to go down together? Is that how stupid the UK gov is? Well, thats not a hard answer to guess..
Not sure what to make of it all, but here's some data that may be of interest. It certainly looks like we're withdrawing gas from storage at a very high rate.
http://marketinformation.natgrid.co.uk/gas/ReportExplorer.aspx
It also looks as though the safety monitor levels for long/medium/short term storage is being reduced this winter, not sure why though. Anyone know?
There are also currently levels for 'Total Firm Monitor' which have been breached in the short and medium range storage facilities - but without more context/research I'm not sure if this is serious or not.
"It may be improfitable to halt the collapse"
Both sides are playing games, given that EU monitors have been denied access to gas dispatch centers in both Moscow and Kiev.
It is irksome in the extreme that Moscow would insist on EU monitors and then deny them access.
In the short term they may force a solution on Ukraine via EU pressure--and clearly Ukraine should not expect its gas to be subsidized if it pursues explicitly anti-Russian foreign policy--but in the long term I see Germany rethinking its decision to abandon nuclear, and perhaps even its foreign policy goal of close integration with Russia.
But were I European, I wouldn't know who to be more angry with.
It is hard to see how this dispute makes sense from the Russian perspective given that Bank Rossi has been forced to devalue the ruble well over 12 times in the last month or so and spent $7 billion of its--rapidly declining--foreign currency reserves in its defense just yesterday. Maybe Moscow wants this dispute just now, but it doesn't make a hell of a lot of fiscal sense.
Either way, yes, Moscow expects Europe to rein in Kiev.
Moscow is playing different game. You are saying: Maybe Moscow wants this dispute just now, but it doesn't make a hell of a lot of fiscal sense.
These words are clearly make sense only if fical sense makes sense. And it looks like Russia thinks it does not - or at least not for long. If you think about it as preparation to life without "world market" - it all makes sense. Ukraine must be either destroyed as barrier to Russia-Europe cooperation or said cooperation must be abandoned. There are no any other way. Viewed from this perspective detruction of Ukrainian factories looks the best way to achieve this result: country will be crippled and easy picking. Ukraine is doing all it can to save these factories - but time will tell if it succeeds. Certainly they make no sense without cheap gas thus Ukraine does what is does. It's quite literally question of life and death. For country - or at least for current government.
That is an interesting take, but I do not see why Moscow would choose now as the time to make such an ultimate stand. It does not make sense ... from a fiscal or geopolitical perspective.
I doubt that Moscow has such a apocalyptic view of the conflict. Obviously it has plenty of other plans on the books for getting energy to Europe and the US--plans which it still favors for plenty of reasons, cultural among them, to having China, or even Japan, as their primary customer. LNG, nord stream, etc. all would obviate the question of Ukrainian compliance over the long term ... and if I were Russian, I wouldn't want to have to bother with Kievian nonsense at all.
So, if Moscow were to say, look we need transparency here, and we need the EU to arbitrate this dispute because clearly there is a kleptocracy in charge in Kiev, that would make sense except ... Moscow barred the EU monitors from access to gas dispatch centers.
If Russia had such a grim view, you'd think they would want to be taken more seriously by their interlocutors in Brussels ... who must be extremely annoyed just now.
But squeezing Ukraine and, by virtue of that, squeezing Europe is counterproductive in terms of having a long-term customer for your gas. Europe can build breeder reactors, too.
Long term focusing on China--and perhaps the Asia Pacific generally--as Moscow's primary customer for natural gas is, given the bleak demographic outlook in Russia and especially eastern Siberia, and the fact that their major competitors there will be Iran and Qatar, just not the best outcome for Russia.
It really is beginning to sound as if some adult supervision, to borrow a heavily overused phrase here on my side of the pond, is required.
If you think that what Russia wants is an us or them ultimatum, then I feel pretty sure that Europe will prioritize de-coupling their energy supply from Russia policy concerns.
Not to sound so sure of myself ... just thinking out loud really.
The focus is always on Russia when it should be, in this case, on Ukraine and its US handlers. The gas transit committee can establish the fact that the gas pressure on the Russian side of the border is 75 atmospheres but nothing is going through Ukraine because Ukraine has closed off the pipe valves. Why do they need to be in Moscow? Yet we still have the EU putting the pressure on Russia to resolve the dispute. Exactly how? By capitulating to Kiev's blackmail? No, this time around the EU and its Ukrainian wannabe protege are going to have to act right to get the gas: pay the proper price and no more siphoning and re-sale.
By all means the EU should go ahead an get the gas independence from Russia it is ceaselessly bleating about. Qatar and Iran cannot supply the market with LNG. Putin has already stated that Russia will build an LNG terminal instead of Nord Stream if the EU keeps on throwing up roadblocks. The russophobic idiocy of the EU is mind boggling.
I agree with you that the media--at least here in the US--is overwhelmingly Russophobic, but I would hardly regard Berlin's Russia policy as such.
What did Kiev do to precipitate the January 1 action by Gazprom?
Simply not paying makes no sense as Ukraine is perennially late with their payments ... why wouldn't Gazprom choose the Summer to begin this standoff when it was least likely to hurt its big customers?
Gazprom chose January 1 and the freezing winter, not Naftogaz, or am I missing something?
In the final analysis, it is Russia that called for the EU monitors, wasn't it? If Moscow wants the EU to resolve the situation for them, then, by all means, give the EU access!
...
I am not focusing on Moscow in order to condemn, I am simply asking how in the world this method and their subsequent behavior suits their interests?
Is toppling the government in Kiev a bigger priority than maintaining a good reputation as an energy supplier and integrating with Europe? If so, surely those in Europe which would like closer cooperation will be sidelined politically and, yes, they will diversify away from Russia.
It's beginning to sound like the oil embargoes, which sure did end up burning Riyadh more than DC.
Jan 1 is when old contract expired and Ukraine said that it will not pay even the discounted price that Gazprom was offering. Russia is not forcing Ukraine to buy it's gas from Russia. Russia has gas and a price and it's up to Ukraine if it wants to buy it or not, but it can't give it away. If Ukraine wants to buy Russia's gas then it needs to pay the price that makes commercial sense to Gazprom. The price that Russia offered Ukraine was lower then what Gazprom itself is paying for the gas that it imports.
You incorrect when you say "toppling goverment in Ukraine". It was Ukraine's bankrupt goverment that choose to block gas transit over to EU, not Russia. It was Ukraine's goverment that refused to buy gas in 2009. The problem is that Ukraine goverment is stealing gas, I am not sure why you portray it as something completely different (political). Russia is not punishing Ukraine by say charging double the going rate. Quite opposite it was offering a highly discounted rate. Now Russia is ready to sell gas to Ukraine at a market price (the price that others are willing to buy that gas for), but it has no obligations to support corrupt goverment in Ukraine with discounted prices or free gas.
Ukraine was always stealing. Gazprom chose January 1 to cut supplies, at the most politically difficult time.
I do not dispute that the terms are discounted from European prices, but they are substantially higher than what Belarus pays, because Belarus toes the Kremlin line. Thus prices are set by political arrangement.
That Kiev wants to pursue an anti-Moscow policy and still get subsidized gas from Russia is clear, and obviously the source of the trouble. Gazprom has a right to be paid for its gas.
But that does not change that a better time could have been chosen for cutting off supply.
But that does not change that a better time could have been chosen for cutting off supply.
How? Gazprom does want to say: we did everything we could yet gas is not delivered. It can not say so in summer: there will be enough gas for a time and Europe will be able to play it's usual "we DO support our European brothers - but please make sure gas is flowing" game.
Have you read "Moon Is A Harsh Mistres" (Heinlein)? There are perfect explanation of the current situation. Gazprom has two needs today:
1. Make everything look as legitimate as possible.
2. Make sure Europe will feel the
heatcold.Then and only then Europe will be forced to do something. Summer is the worst time to try to do it.
I do not dispute that the terms are discounted from European prices, but they are substantially higher than what Belarus pays, because Belarus toes the Kremlin line. Thus prices are set by political arrangement.
Russia never said it'll use market prices for all customers. Heck, even the biggest market apologets don't do this (how good is Cuba<->U.S. market works?). But they certainly fed up with the idea that hostile government get's gas with discount.
A quick and easy way for the Ruskies to get rid of the Gov in Ukraine...have the people do it for them when they freeze their a$$"s off.
And so the great Power Down starts with this......
Khimru,
What you and most people do not undestand is that Eastern Ukraine and Crimea are "Russian." There will never be a war between them, this is unthinkable and detestable to all. The very thought sickens both peoples(with the exception of Western Ukrainians)
1. From the time of Catherine the Great until sometime in the early 20th century this part of Ukraine was called New Russia - it is even written on maps.
***Note the original Ukraine territory was expanded 5 times to its present day size by the Russian czars. Please look at a map of the original Ukraine which joined the Russian empire and present day Ukraine***
2. These parts of present day Ukraine were settled by Slavs from Russia, Belarus and the original parts of Ukraine.
3. Most Russians have close relatives in Ukraine and vice versa.
4. Eastern Ukrainians think and feel Russian.
5. The majority of total Ukrainians and the vast majority of Eastern Ukrainians want unification with Russia.
It happened many times in the past. Take a look on Korea, for example. Plus Russia will be more than happy to accept Eastern Ukraine and Crimea in Russia is they'll denounce Kiev's government.
And this is Russia's trump card. They are saying to Ukraine: kick your pro-U.S. government - and all will be good. Russia bungled a lot of opportunities and there are big possibility it'll bungle this one too - but this IS great chance to solve problem of orange government once and for all. Russia took it.
"It is irksome in the extreme that Moscow would insist on EU monitors and then deny them access."
This is false accusation. EU already apologized to Russia for it.
ah, interesting ... makes a hell of a lot more sense now. thank you.
I don't understand, why would EU being apologizing to Russia if Russia denied access?
For false accusation. Russia gave access to all places asked... but was somewhat slow (why the hell they need access to central controller's office in Moscow?). EU representatives admitted that problems were short-lived and apologized.
Russia is NOT interested in such conflicts. Ideal outcome for Russia is to freeze Europe - but it must be doing "everything it can" at the same time. We'll see if it'll manage this task or not. Less than ideal but still good outcome is to force Ukraine to stop stealing gas...
Why is the ideal outcome for Russia the freezing of Europe?
What could Moscow possibly gain from that, except enemies ... and lots more of em?
Can you link to news of this apology? I can't find any mention of it.
One point never mentioned: slavic languages are very close to each other, much more so than germanic languages. In the Low Countries, there exists a remnant of a very diverse set of dialects; people thirty miles apart had a hard time understanding each other - the divergence was greater than between Chesko and Slovensko, and greater than between chesko-Slovensko and Polish; Ukrainian and Russian are part of the same continuum of dialects/languages, permitting good communicability.
Russian history starts in Kiev, Moscow was a relative late-comer. Ukraine is also known as Biela Rus, White Russia.
I am quite certain, that quite a few Russians feel some allegiance to Kiev, while a lot of Ukrainians have a strong link to Russia. I suspect a significant proportion of the 'white Russians' wouldn't mind being reattached to the Russian empire.
These elements of history and linguistics will colour the background of the events now unfolding.
Question - How did Europe heat itself up to an including the WWII years (say 1900-1946)?
My mom and I were talking about the current Gazprom situation and she asked that. Specifically, how were homes heated in Germany, France and the UK? My guess is coal from those native countries - I mean, I don't think they were piping gas in from Russia during the first half of the 20th century!? [My mom herself came from a small town in central Italy and those houses were heated with wood, but the last few decades or so they have gotten gas].
Thanks for any info.
coal. Going further back, there are writings from the time about how abominable it was for even the wealthy to have to compromise and use this disgusting black stuff instead of nice solid wood logs, as the forests were used up for fuel, buildings, ships and charcoal for smelting metal.
I can't speak for France or Italy, but just before the Great War, UK was the global #1 coal consumer; Germany was #2. Britain had a number of coal/steam powered naval vessels, which Churchill later had coverted to run on oil/deisel.
Many countries used peat as fuel including northern Germany, Scotland, Estonia, Netherlands, Finland, Ireland, etc. Indeed, I believe peat is still used as fuel in a number of countries.
The UK was fuelled predominately by locally mined coal in the first half of the 20th century.
UK coal production peaked in 1913 at some 292 million tonnes annually.
Most urban UK households used coal for heating and cooking, with a cooking range in the kitchen/parlour and open fireplaces in all major rooms.
Coal was widely used for steel making, industrial heat, power generation and manufacture of coal gas.
Manufactured gas (coal gas) or electricity was increasingly used for cooking from the 1920s only, and was widely promoted as clean energy by the gas and electricity companies.
Coal was rationed during WW2 right up until 1952. Only 50kgs were permitted per week, (less in the south of England that was considered warmer). This was equivalent to about 450kWh of heat per week - but burned very inefficiently on open fires.
Natural gas was discovered in the North Sea in 1965 and the conversion from coal gas to natural gas occurred in the early 1970s. Earlier natural gas fields were found by chance in southern England in the 1880s during railway expansion and used for station heating and lighting in Uckfield, Sussex.
The popularity for oil fired heating in the UK has varied with the price of oil. It declined greatly in 1973 with the first oil price hike. Oil heating is generally only used in rural locations not connected to the natural gas distribution main.
Wood and peat remain popular in rural locations - especially rural Scotland and Ireland.
2020
In the UK "town gas" was produced from coal but was mainly used for cooking until the advent of natural gas from the North Sea when gas central heating became widespread. Also people were accustomed to feeling colder in winter and wearing more clothes indoors, principally because they could not afford to heat the whole of their house, i.e. the cost of energy was comparatively higher.
Towards the thoughts of coal dependency I'll toss in a fact that many in the US don't realize: the economic expansion in the US has been fueled almost exclusively by coal-fired electrical generation. Nuclear, natural gas and other sources have expanded somewhat but the increase in US electrical generation (THE energy source of industry here) from coal has increased many fold. It's been a while since I've seen the stats but I suspect the proportion has changed little.
Much lip service has been offered towards alternatives for decades but coal production and the associated transportation system has continued to expand. Even today the US is importing significant volumes of coal from Columbia with most delivered to East Coast plants.
From what I understand England had agreed with the EU to shut down coal fired plants by 2015 or so. With the decline in N. Sea production I wonder if they will still be able to honor that commitment.
And our middle case is that net oil exports from both Norway and Russia (from mature basins in both cases) approach zero around 2026.
I can't help thinking about the "Cousin Nicky/Cousin Willie Letters" when reading this board!
Matt
If this thread in any way reflects the politcial 'realities' in this dispute, then the gas is going to remain turned off for a very long time,
with a serious risk of violent tactics being introduced.
What comes to my mind is the game 'rock paper scissors' There can be no long term winner.
"then the gas is going to remain turned off for a very long time,"
But the EU, see markets today, doesn't have a very long time
and like Georgia, the Russians say bring it.
The Russian military skipped the smart bomb era and concentrated
on rocket speed, maneuver and throw weight.
And introducing tac nukes (no such thing) to every battlefield.
Looking at this from a 'prisoner's dilemma' point of view, Ukraine is basically bankrupt, so it has very little to lose by trying to hold the EU to ransom. Also, I suspect that, as with a lot of failing states, there is no single point of central control, but a whole bunch of feuding oligarchs each trying to maximize their cut.
Russia has little to lose except cash flow by withholding the gas. It has little to worry about losing it's reputation for being a reliable supplier, it has now so obviously got the EU in a state of dependancy it no longer needs it. Medium term it's gas will go east as profitably as west.
Europe is in a state of political denial and paralysis. It has no central energy policy and little financial or diplomatic clout. So far, the only people to significantly suffer are poor Eastern Europeans who nobody cares about much. With the world being in the middle of an economic crisis, the political leaders have their eye off the ball. In the UK, the weather has warmed up, so we have another week before our gas levels reach politically embarrassing levels. Sooner or later, industry is going to start shutting down, and then you will hear some serious noises.
If the US had any interest in the outcome in anyway, there would have been by now by a major 'popular' insurrection in the Ukraine, and either there would be a change of government or a deal would have been struck.
I don't see it is in anyone's interest to sabotage the pipelines, I do see a slow rising unrest in Europe, spreading from east to west, as we grind to a halt.
The EU is well on its way of convincing Russia to build LNG terminals instead of pipelines. Then the intellectual giants running the EU will have to compete with the rest of the planet for Russian gas. Actually, this is a very healthy thing and trans-border pipelines should become a thing of the past.
Hello all
Lots of feelings and opinions here :-).
In the end the gas dispute will accelerate the EU Energy efficiency/ security of energy supply plans and actions. http://ec.europa.eu/energy/strategies/2008/2008_11_ser2_en.htm
This is good and will make a new Climate agreement in Copenhagen this year more likely.
While such an agreement will have lots of shortcomings, it is another good opportunety for the international society to train in agreeing on world important issues, preparing for more difficult decisions to come.
Regarding Gas I can conclude that the gas is bought by Europe with European money, which the suppliers need. So there will be a solution.
And finally a historical note.
Russia was made possible by Vikings that lived in the Kiev area . They were asked by the Rus to come to Novgorod to protect them from the hordes. Rus means Viking- by the way:
A in depth description of the complex history of the area 800 BC- to 1200 BC here http://en.wikipedia.org/wiki/Kievan_Rus%27
Kind regards /And1
I've read your article about the background of this crisis (Ukraine-Russia: some background and context) and I have two questions:
1. You seem to say that Gazprom has been paying nothing to Ukraine for the transfer of the gas to europe since the 90s, giving some gas instead. Are you really sure about that?
2. If the real battle that is happening now (between oligarchs) is about who is going to get the money paid by Ukraine for the gas, why is Gazprom claiming that Ukraine is not paying?
According to my comprehension of your "theory", Gazprom should only be acting within Russia to get the money it deserves for the gaz, and Ukraine should not be involved at all.
Thank you for your answer.
I'll say what I know about it:
1.) Yes that was the case until 2006. In 2006 there was a similar dispute and after settling it there were big changes. Russian and Ukraine signed two separate agreements. one for gas transport (which is still active) where Ukraine guaranteed delivery of Russian gas to Europe in exchange for money only. Second agreement was annual (or simi-annual) for sales of Russian gas to Ukraine. The contract for gas transport is currently valid with prices set for at least two more years. The contract to sell gas to Ukraine needs to be renegotiated (price is different every year) and Ukraine's goverment blocked this signing. Apparently it was blocked because different parts of Ukraine's goverment are controlled by different business groups (aka oligarchs) and there were making money off discounted Russian gas. This brings us to the second question.
2.) In Russia gas are extracted and sold (mostly) by gazprom. So Ukraine ows money to gazprom. In 2006 Ukraine demanded that gazprom set-up an intermediately that would allow different groups (controlled by different oligarchs) in Ukraine to make money off Russian gas. These different groups control different parts of the Ukraine goverment and are constantly fighting with each other. This crates a mess where each part of the goverment acts a country on it's own and believes that it's the other part of the goverment (effectively different set of oligarchs) that's responsible for paying bills.
The UKs National Grid are (according to this data sheet) withdrawing gas from long-term storage faster than the 'max withdrawal rate'!
There's a lot of data here that may be interesting:
http://www.nationalgrid.com/uk/Gas/Data/storage/
Why - for example - are they lowering the 'Total Firm' and 'Safety' monitor levels?
Mid and Short term storage have already crossed the "Firm Monitor" line - whatever that means...
Short Term Storage
Mid Term Storage
Data from http://marketinformation.natgrid.co.uk/gas/ReportExplorer.aspx