Tilted
..
A little long - may not be of interest to some/most.
I don't know how much people are following the conflict between Russia and Ukraine over natural gas supplies, but it is getting ugly. Although it could still get resolved quickly, it is looking more and more likely that it will drag on for some time. If it does, it could lead to serious issues for countries in southeastern Europe and perhaps even Russian military action that has the potential to upset the oil market.
Basically here is the situation - Russia is a major supplier of natural gas to southern Europe, and in particular Ukraine, the largest of its former member republics. Most of the natural gas that Russia supplies to Europe is transported through pipelines running across Ukraine. Russia pays Ukraine a small fee for the use of those pipelines, and had been selling Ukraine gas for $180 / thousand cubic meters in 2008.
Initially, they wanted to up the price to $418 (a ridiculous increase given the current market and the specific situation) for the new year. Eventually, the Ukraine said they would go as high as $235 and Russia said they would go as low as $250. There were also other points of dispute, including Russia's claim that the Ukraine hasn't re-payed some debt it owes for 2008 supplies, and the Ukraine wanting to bump the transit fee it gets from Russia up to $2, from $1.70.
Well, they never came to an agreement, so as of January 1st, Russia cut off supplies to Ukraine, They assured the rest of Europe that they would maintain the same supply levels to them (supplies which are transported across Ukraine). Well, shortly thereafter some European nations started reporting a diminished supply of natural gas. Russia accuses Ukraine of stealing the gas. Ukraine accuses Russia of not sending enough (or not placing enough pressure in the lines to make the gas flow fast enough), in an attempt to make it look like Ukraine was stealing the gas. Ukraine says they have had to siphon off small amounts of gas in order to maintain enough pressure in the system to allow the flow to continue (given the way the pipelines work, this is plausible). Also, the Ukrainian company which controls this process has filed an action in court seeking permission to break the contract they have with Russia to provide the transport pipeline service.
Oh, and by the way, Russia said that since Ukraine didn't accept the $250 price, the price would be $418 now. Then, they said that since they didn't accept that, the price was going up be $450.
One thing to note - there has been growing tension between Ukraine and Russia, because Russia doesn't like Ukraine's efforts to connect itself more with the European community and less with their historic masters - Russia. Most specifically, their attempts to join NATO have been of concern to Russia.
The unreasonable position that Russia has taken could just be a strong-armed negotiating tactic. But, some players in the energy markets speculate that there is something deeper and more contrived going on.
The Russian economy is intensely linked to energy commodity supply, and thus to energy prices. As the global economy has slowed, the resulting decline in demand for oil and gas has created a bleak outlook for them. With justifiable fears of an impending economic collapse, their economic situation is far worse than ours.
Some have suggested that they are on the cusp of reviving their imperialistic policies, in an effort to avoid that collapse. Many people that are familiar with the oil market believed that their conflict with Georgia, this past summer, was contrived solely for the purpose of inflating or maintaining oil prices.
Perhaps, this feud with Ukraine is similarly contrived to provide a pretext for military action there. There is a growing fear that desperation on the part of Russian leaders will lead to efforts to bring some of the former member republics back under their control. There are a lot of valuable resources, especially energy reserves, in those neighbor states.
Is this much ado about nothing? Hopefully.
Russia to cut gas supplies to Ukraine
Europe watches gas flows after Russia cut-off
Ukraine: EU Needs to Help Resove Russia Gas Dispute
Russia wants warships stationed around the world
Flashpoint Russia: Imperial Energy Strategy?
I don't know how much people are following the conflict between Russia and Ukraine over natural gas supplies, but it is getting ugly. Although it could still get resolved quickly, it is looking more and more likely that it will drag on for some time. If it does, it could lead to serious issues for countries in southeastern Europe and perhaps even Russian military action that has the potential to upset the oil market.
Basically here is the situation - Russia is a major supplier of natural gas to southern Europe, and in particular Ukraine, the largest of its former member republics. Most of the natural gas that Russia supplies to Europe is transported through pipelines running across Ukraine. Russia pays Ukraine a small fee for the use of those pipelines, and had been selling Ukraine gas for $180 / thousand cubic meters in 2008.
Initially, they wanted to up the price to $418 (a ridiculous increase given the current market and the specific situation) for the new year. Eventually, the Ukraine said they would go as high as $235 and Russia said they would go as low as $250. There were also other points of dispute, including Russia's claim that the Ukraine hasn't re-payed some debt it owes for 2008 supplies, and the Ukraine wanting to bump the transit fee it gets from Russia up to $2, from $1.70.
Well, they never came to an agreement, so as of January 1st, Russia cut off supplies to Ukraine, They assured the rest of Europe that they would maintain the same supply levels to them (supplies which are transported across Ukraine). Well, shortly thereafter some European nations started reporting a diminished supply of natural gas. Russia accuses Ukraine of stealing the gas. Ukraine accuses Russia of not sending enough (or not placing enough pressure in the lines to make the gas flow fast enough), in an attempt to make it look like Ukraine was stealing the gas. Ukraine says they have had to siphon off small amounts of gas in order to maintain enough pressure in the system to allow the flow to continue (given the way the pipelines work, this is plausible). Also, the Ukrainian company which controls this process has filed an action in court seeking permission to break the contract they have with Russia to provide the transport pipeline service.
Oh, and by the way, Russia said that since Ukraine didn't accept the $250 price, the price would be $418 now. Then, they said that since they didn't accept that, the price was going up be $450.
One thing to note - there has been growing tension between Ukraine and Russia, because Russia doesn't like Ukraine's efforts to connect itself more with the European community and less with their historic masters - Russia. Most specifically, their attempts to join NATO have been of concern to Russia.
The unreasonable position that Russia has taken could just be a strong-armed negotiating tactic. But, some players in the energy markets speculate that there is something deeper and more contrived going on.
The Russian economy is intensely linked to energy commodity supply, and thus to energy prices. As the global economy has slowed, the resulting decline in demand for oil and gas has created a bleak outlook for them. With justifiable fears of an impending economic collapse, their economic situation is far worse than ours.
Some have suggested that they are on the cusp of reviving their imperialistic policies, in an effort to avoid that collapse. Many people that are familiar with the oil market believed that their conflict with Georgia, this past summer, was contrived solely for the purpose of inflating or maintaining oil prices.
Perhaps, this feud with Ukraine is similarly contrived to provide a pretext for military action there. There is a growing fear that desperation on the part of Russian leaders will lead to efforts to bring some of the former member republics back under their control. There are a lot of valuable resources, especially energy reserves, in those neighbor states.
Is this much ado about nothing? Hopefully.
Russia to cut gas supplies to Ukraine
Europe watches gas flows after Russia cut-off
Ukraine: EU Needs to Help Resove Russia Gas Dispute
Russia wants warships stationed around the world
Flashpoint Russia: Imperial Energy Strategy?
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