Gazprom turns off taps on Ukraine’s gas supply (again)

gazpromjsc-header1In what is becoming an all too familiar show of “transparent” hubris, Russian gas giant Gazprom (one of MSV’s favourite corporate bullies) has once again wished Ukraine a Happy New Year by turning off gas supplies to the former Russian sattelite, as reported this morning by BBC News, prompting fears that European supplies will also be affected.

Gazprom had reduced natural gas deliveries to Ukraine by 25%Monday, saying the country has failed to pay $600 million in gas bills for the year. Gazprom also said that Ukraine’s state energy company, Naftogaz Ukrainy, failed to sign contracts for the supply of gas this year. Gazprom has refuted accusations from Naftogaz that the reduction of natural gas supply from Russia was closer to 35%.

“Due to the lack of progress in negotiations and Naftogaz’s failure to sign gas supply contracts – including for January and February – gas supplies to Ukraine will be reduced by an additional 25% at 1700 GMT [12 p.m. EST],” Gazprom spokesman Sergei Kuprianov said in a statement.

About 80% of Russian gas supplies to Europe pass through the Ukraine, which puts Naftogaz in a position to siphon off supplies intended for other customers throughout Europe. In January 2006, Russia cut supplies to Ukraine completely for a period of three days causing gas volumes across Europe to fall, as Ukraine scrambled to satisfy its demand.

In early December 2008, both parties had agreed Ukraine would pay $1.5 billion in debt accrued this year and last. They also agreed that two controversial middlemen – Swiss based RosUkerEnergo and UkGazEnergo – would be replaced by a 50-50 joint venture between Gazprom and Naftogaz. However, Gazprom insists Ukraine owes another $600 million for 19 billion cubic meters of Russian gas it received without a contract. The oil giant also wants Ukraine to approve the creation of the two new companies set to replace RosUkerEnergo. Yulia Tymoshenko, the Ukrainian prime minister, says the Ukraine has fulfilled its obligations and accused RosUkerEnergo of running up debts for $4 billion cubic meters of gas.

Gazprom chief Alexey Miller in an effort to allay Western fears stated that Gazprom would continue full shipments to the European Union,  through pipelines that cross Ukraine. The Ukrainian president’s energy adviser, Bohdan Sokolovsky, also said Ukraine would guarantee the delivery of gas to Europe.

“Whatever Russia ships we will deliver,” he said. “This is what we have committed to.”

For those readers fresh to the scene, there is a considerable political slant to this measure; relations between Russia and the former Soviet republic have steadily disintegrated since 2005 when Viktor Yushchenko took office following the Orange Revolution. Since then, Yushchenko has angered Moscow by seeking to align Ukraine with the West away from the Kremlin’s influence. Particular bugbears have been Ukraine lobbying to join NATO & also their vocal support for Georgia in the recent “civil unrest” in the Caucasus.

Meanwhile, Russia has more than tripled the price it charges Ukraine for gas. Gazprom had offered a contract with gas set at $250 per 1,000 cubic meters for 2009, which Ukrainian officials said was still too high. As a benchmark, faithful Russian ally Belarus is paying $128 per tcm, whilst European customers are being charged an average $418 per tcm, a hefty premium that Gazprom originally tried to impose on Ukraine late last year.

As previously  reported on MSV in Serbian Standoff, Gazprom is looking at a number of intiatives to pump gas to the West without transitting Ukraine, the primary project being the South Stream Pipeline, which will bypass Ukraine via the Black Sea & land in Bulgaria, transitting Greece & Serbia before going offshore again somewhere on the Adriatic to reach European customers.

UPDATE 1 (04/01/09) from Bloomberg :

Gazprom increased natural-gas supplies to Europe via three routes as Russia and Ukraine courted international support amid a deepening price dispute. Russia’s state-owned gas exporter boosted shipments along two routes through Belarus and one to Turkey, Boris Posyagin, head of Gazprom’s dispatch department, said yesterday in comments broadcast on state television

UPDATE 2 (05/01/09) from Reuters

Croatia, which imports 40 percent of its annual gas needs, most of it from Russia, followed the Czech Republic, Turkey, Poland, Hungary, Romania and Bulgaria in saying deliveries had been affected by the row.

“Imports of Russian gas have been reduced by 7 percent. However, it does not affect supply to consumers as the situation in the system is stable,” Ivana Markovic, a senior official with Croatian pipeline firm Plinacro, told state television.

UPDATE 3 (12.01.09) from BBC News

A statement from the Russian energy giant said Ukraine had signed a deal on the transit of Russian gas to the EU “without any conditions whatsoever”Experts say it will take up to three days for Russian gas to reach some parts of Europe even if Russia agrees in the next few hours to turn the taps back on.

 

Russia had said it could not implement an agreement with Ukraine to resume gas flows to Europe, accusing Ukraine of adding “unacceptable” conditions.

Moscow alleged that Ukraine had added a clause denying it owed Russia for past supplies of gas

UPDATE 4 : (20/01/09) from Bloomberg

Russia’s rouble and the Ukrainian hryvnia strengthened as OAO Gazprom resumed shipments of natural gas to Europe after a two-week shutdown.The ruble snapped a four-day decline against the euro and the hryvnia appreciated to its highest level versus the dollar in six days after Russia’s gas exporter said it will ship about 430 billion cubic meters of gas today. Currencies in eastern Europe pared declines.

“The lack of gas was creating a negative dimension for industry,” said Roderick Ngotho, an emerging markets currency strategist in London at UBS AG. “The resumption of gas means industry can do the best it can given the current downturn in external demand without the added negative of disruptions to energy flow.”

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2 responses to this post.

  1. Posted by Simon on January 3, 2009 at 7:44 am

    Don’t forget the North Stream Pipeline, which is planned to run under the Baltic Sea, direct to Germany – much to the annoyance of those countries it will bypass.

    http://www.nord-stream.com/the-pipeline.html

  2. Posted by Illywhacker on January 4, 2009 at 7:10 am

    Thanks Simon (Dodger ?) …. will be looking at the gas pipelines going forward, as there are a number of different pojects in emerging markets across Central & Eastern Europe & also Central Asia / China

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