Oh look. It's cold outside and Gazprom (Russia) is bullying the Ukraine...

[AtheneNoctua]

and therefore threatening to cut off their gas supply to Western Europe.... AGAIN.

What a shock.

Guess that will help keep the price of gas up. Russias own little price fixing sceme to ensure their income.

news.bbc.co.uk/2/hi/business/7804336.stm

So on what basis would you set the price for Russia's natural gas?

What I meant was that turning off the taps (and hence taking a huge amount of gas out of the Western European market) will itself drive up the price of all gas.

I think the Russian practise of turning off the taps is nothing short of bullying. They make Bernard Matthews looks like Mother Theresa.

So Russia must continue to supply the Ukraine with gas despite there not being a contract and the Ukraine being massively in arrears as far as payment goes?

IIRC, last time, what happened was that the Ukraine started siphoning off the gas from pipelines intended for Western Europe.

see here

There is no suggestion of the Gazprom cutting off supply to Western Europe. Am happy to be corrected and surprised to find myself standing up for Russia!

As I recall, Russia (falsely) accused the Ukrain of siphoning off gas. 45% of Western Europes Gas supply comes from Russi (through Ukraine).. If Russia cuts the Ukrain off, they cut off almost half of Western Europes supplies ... In January. Oh, that is nice timing.

Of course there should be a contract. What is wrong with the existing one. Has Russia decided to jack up the prices at unreasonable rates, AGAIN?

Must admit I don't know the details of the contract negotiations. But, Russia is not likely to be the more reasonable party.

Are the Guardian wrong then, about the Ukraine siphoning gas? Have you a more reliable source of info? Bloomberg usually provides fairly decent reporting - here is their summary:
www.bloomberg.com/apps/news?pid=20601100&sid=aolF0OjRObts&refer=germany

• It seems that there is nothing wrong with the existing contract, it just expires on the 1st of January and negotiations on a new one have failed, partly due to massive arrears.

• If Gazprom were to charge Ukraine full market prices like they charge other European countries, the cost of gas next year could rise to $418 per 1,000 cubic meters, from $179.5 now. For obvious reasons of investment and infrastructure, it is not sustainable to supply energy at below market prices. Why do you think that the going market prices are unreasonable?

Why are you assuming the Ukraine is being more "reasonable" than Russia? They are really struggling right now, with the fallout from the economic crisis. As are Gazprom themselves who are being forced to negotiate a government bailout.

Russia wants to increase the current fees by 50% in the new contract. Considering Russia is transporting their product through Ukraine, it is fair the Ukraine has their price significantly reduced.

And the Ukrain is prepared to come up to market rates, they just want to do it at an affordable rate. 50% increase every year sounds pretty steep to me.

I think I mistyped the the amout of Eurpean gas which comes from Russia below. I think it's more like a quarter. Apologies for that.

Couldn't find the siphoning comment in the bloomberg article. And, the Guardian is crap. Don't believe a lot of what is written there.

I did not see anything about a 50% increase, but that would still mean the Ukraine was paying close to half the market rate. Of course it is steep, but energy users in capitalist countries faced massive increases over the last few years. That is what happens on free markets. Are you arguing in favour of communism and increased reliance on the Kremlin? Because that is surely not what the Ukranian people voted for and fought for...

You are of course aware that Russia pays the Ukraine for allowing them transport their gas? From that Bloomberg article "Ukraine may be able to avoid a shutoff of Russian natural gas by settling its debt to Gazprom through deductions from future transit fees that Ukraine charges Russia for transporting gas to Europe"

I believe the dispute is largely due to Russia reducing the amount they pay for the priviledge of transporting their good through Ukraine and suddenly claiming Ukraine is not paying market rates. They are doing this because they are bitter about the Ukraine aligning them selves more closely with the West and further from communist Russia. This is about politics and not economics. Why is Russia suddenly finding this change in pricing so urgent?

I think Rusiia has every right to renegotiate contracts. But, the Ukraine has every right to expect them to be reasonable. And turning off the taps in the dead of winter is ot in my opinion reasonable.

I read the 50% increase elsewhere. I'll see if I can find it again and post a link.

Am stilling looking for the 50% quote. Where the heck was it? Meanwhile, here is a interesting article (if you'd like to read it). www.telegraph.co.uk/earth/energy/gas/3982543/Russia-look-to-control-worlds-gas-prices.html

This article says they want to double the rate. Definitely not reasonable.

www.google.com/hostednews/ap/article/ALeqM5iZb7qkByI0qmfe-bmUGoQfQcDzhAD95D4BMG0

"Gazprom is demanding that Ukraine pay $418 per 1,000 cubic meters for future deliveries, roughly what Russia charges other European consumers. That would more than double the current price of $179.50."

I also noticed (in my failed search for the 50% increase statement) that the BBC is reporting Europe gets 42% of its gas from Russia, but many other sources are saying 25% (hence my confucion below).

In the 2006 dispute, Gazprom were very clear that they would not be increasing the Ukraine's price to market levels immediately - it is in no way clear from any of the articles linked whether this is still the case.

Russia is not "suddenly claiming Ukraine is not paying market rates". It not in dispute that Ukraine has not been paying market rates. Of course there are political motivations and elements to this conflict, but there is also an urgent financial situation - the Ukraine is struggling and perhaps unable to pay up. Gazprom is struggling and in need of payment. Are Russian consumers still paying more for their gas than Ukranian consumers? If so, that will add to the political pressure.

Yes, of course the financial crisis is adding to the complexities here. Ukraine is having trouble paying the bills. But, Russia is being very hard on them as a pay back for daring to align with the West. Russia has a very common practise of using their oil and gas reserves as a tool to hurt those who have upset them. They oppose the BTC pipeline because they don't like the idea of pipelines from the Caspian Sea not going through Russia and therefore not in their control.

But, I don't think Gazprom is struggling financially. They just reported an 85% increase in profits. However I think Russia is struggling with the "rubble" (the crumbling rouble) and they are looking to Gazprom to fund them.

And another example of Russia bullying tactics for someone who dared to oppose Putin.

news.bbc.co.uk/2/hi/europe/7805505.stm

And now the Ukranian supplies have been severely cut down. What happens next?

One thing i don't understand is that if I understand it correctly the Ukraine gets its gas from the same pipeline that carries gas through to the rest of Europe. How does that work in terms of cutting off the Ukraine without cutting off Europe?

Interesting wikipedia article talking about the history of the dispute.
Am off out now and will read later!

They have cut to amount which Ukraine normally uses so reduced the flow down to what should continue through the pipeline to Europe.

Ukraine says they have paid Gazprom. Gazprom says they haven't received it. Personally, I'd beleive Ukrain over Russia, but I guess we don't know until the thrid party intermediary (who is handling the money transfer) confirms which story is true.

This seems a very unreasonable hike to me. It would be like if you paid £1000 per month to rent your house, and then when your 1 year lease was up, the landlord damanded £2000 per month. I imagine a renter in that position might be reluctant to sing the next lease... and would hope to not be locked out on the 1st day the lease had expired.

Russia is being very unreasonable.

However, it will be interesting to watch this develop and see if Ukraine has paid or not (and hence which one of them is lying).

From reuter: uk.reuters.com/article/oilRpt/idUKL19444420090101 (copied below)

MOSCOW, Jan 1 (Reuters) - Russia's state controlled gas monopoly, Gazprom (GAZP.MM), wants to sell gas to Ukraine at $418 per 1,000 cubic metres (tcm) in 2009, more than double the price Kiev paid last year, RIA news agency quoted Gazprom CEO Alexei Miller as saying on Thursday.

"Gazprom will deliver gas to Ukraine at market prices of $418 per 1,000 cubic metres from January," Miller was quoted as saying, citing Ukraine's refusal to buy gas at $250 per tcm.

Last year Ukraine paid $179 per tcm. (Writing by Guy Faulconbridge; editing by Giles Elgood)

Thanks Athene.

Its really hard to know the full story. Its starting to break that there may not be the full volume of gas shipped through to europe tomorrow]]

reuters article

odd source!

but there again its a minimum reduction in flow down to 296mcm from 303 mcm

I just read this thread.. and I am from Ukraine and I libe in a russian region of Ukraine, which is East..
Upwind-yes, you are right about the prices and why Ukraine has to pay less than everyone else and all of that.. And yes, Ukraine is paid to transport gaz thru our country.. and those prices are not on the market level, but far lower.. and Russia doesn't want them to be higher...
And this is all political games not economics. And Ukraine was not syphoning gas. To transpoprt gas thru the sysytem there is an amount of gas needed. And russia was pupming only the amount they need to sell. and nothing for pumping process... So where does Ukraine has to take this needed amount of gas from???

It is very sensible subject and without knowing the history between two countries you cannot say Russia is right!!!
I do not make my country look good. They have to deal with gas contracts in June, they left it till end of the year, just a day before the New Year.. And for us, New year is more imortant than Xmas...Cultural issues..

Russia is trying to manipulate the whole Europe...

Maybe if we'd all built nuclear power stations instead of saying "hey! I know! let's put all our energy needs in the hands of a country we hated until recently and rely on their good will"

oh and anyone think it ironic that we wanted Russia to become capitalist?

They are doing exactly what good capitalists do - maximising profits. We should cheer them on.

Thank you for posting Ukranianmum. It was interesting to read your view point. You are right that the system does need to be at a certain pressure and I see that the European monitors have complained that the gas flowing from Russia this morning was very low. The Russians are saying that its because Ukranian export pipes haven't been opened. The monitors are also saying that the access to the pumping stations in both countries has been limited.

Its a horrid situation for many now. I only hope it can be resolved soon. I am pretty sure that Russia is using it as political tool (I see now they are accusing the US of partially orchestrating the crisis!)

It is really hard to know the full truth once political games start being played.