Gazprom Threatens To Cut Off Ukraine
Published: March 12, 2014 (Issue # 1801)
Gazprom has threatened to cut off gas supplies to Ukraine unless overdue gas bills are paid. On Mar. 7, the deadline for payment of February’s gas supplied to Ukraine, Gazprom CEO Alexei Miller said the debt totaled $1.86 billion and issued this warning: “Either Ukraine makes good on its debt and pays for current supplies, or there is a risk of returning to the situation of early 2009.”
In 2009, the Russian state gas company cut supply to Ukraine for about ten days as a result of a politically-charged pricing dispute. This crisis led to gas shortages in a handful of central and eastern European countries reliant on Russian gas flowing through Ukraine and accelerated European attempts to diversify its gas supply and supply routes.
Since that time, however, much has changed in the gas trade between Russia and the EU. Though Gazprom remains the EU’s dominant gas supplier, supplying about a quarter of its gas consumption, only about 50 percent of this gas transits Ukraine, compared to about 80 percent at the time of the 2009 crisis.
EU Energy Commissioner Guenther Oettinger pointed out that EU countries are now required to have a month’s worth of gas in storage and that these storage containers are relatively full due to this year’s mild winter, Reuters reported.
“We’re in a much better position than we were five years ago,” Guenther said.
The gas trade has been a major point of contention between Russia and Ukraine for many years, but it seemed a mutually agreeable, though delicate, solution had been achieved a few months ago.
Following Ukraine’s withdrawal from the Association Agreement with the EU in December that sparked the initial protests in Kiev, Putin and Yanukovych struck a deal that saw Gazprom granting Ukraine’s state energy company, Naftogaz, a significant gas price discount. The deal, which lowered prices from around $400 per thousand cubic meters to $268.5, was to be renegotiated every three months.
On Mar. 4, with the first three months of the agreement coming to a close, Gazprom decided not to renew the discount.
During a meeting between Gazprom chief Alexei Miller and Russian Prime Minister Dmitry Medvedev, it was announced that starting April, Gazprom would raise gas prices back up to the levels in the existing contract, the same contract that Yulia Tymoshenko had signed in 2009 and resulted in her imprisonment.
Putin, during a news conference on the same day, claimed the decision to raise prices was motivated by economics, not politics. “They failed to pay off the debt, I think it’s $1.5 billion as of today and if they don’t pay for February it’s going to be $2 billion. So if you don’t pay, then let’s go back to regular prices. This makes perfect commercial sense. This has nothing to do with the situation in Ukraine.”
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