Sunday, January 11, 2009

High Treason – II. Some conclusions from the Cold War started by Russia-Ukraine gas dispute.

The Gas Cold War 2009 caused by the Russia-Ukraine gas dispute has not finished yet, but we can already make some important conclusions. Sitting in the cold Kiev flat (we’ve got very low pressure in central heating system), I will try to give my point of view as briefly as possible.

Conclusion 1. The indisputable winner of the Gas Cold War 2009 is Russia and Russian Gazprom.
I would not agree with some observers who say that the image of Russia as a reliable gas supplier and the Gazprom as a relevant business partner suffered a lot. Europe and Europeans may think and feel whatever they want, but it is really impossible to replace more than 160 billion of cubic meters of Russian gas with some alternative source of energy. So, Europe will stay dependent on Russian gas supply, whatever the image of Russia will be.
Actually Russian Gazprom has already received a lot of profits from the Cold War:
1. Gas prises. European consumers were predicting the Russian gas average prices for Europe to fall to around $320 per tcm (thousand cubic metres) in 2009 due to the low oil prices level. New Cold War led to rise of the oil demand in Europe as of the alternative energy resource, and this will prevent the significant fall of gas prices.
2. Alternative pipeline projects. Gazprom currently has two new gas pipelines projects: the Nord Stream pipeline, which runs under the Baltic sea from Russian Vyborg to German Greifswald, and the South Stream, which will cross the Black Sea to Bulgaria and then split in the direction of Austria and Greece. Both pipelines will definitely get bigger support of the European companies, as the alternative for “non-adequate” Ukrainian route. (Though Ukrainian route cannot be eliminated as it transports around 80% of Russian gas export to Europe).
3. Punching Ukraine. Undermining the image of Ukraine and its President Viktor Yushchenko was a “pleasant revenge” of Russia and its top-authorities for Orange Revolution, support of Georgia, and Holodomor festivities. After this crisis nobody (except of some ultra-pro-Ukrainian-idealists) in Europe would think seriously about the possibility for Ukraine to join the EU earlier than in 100 years, and nobody in NATO would seriously consider future Ukrainian full membership in the Alliance.
4. Extra money. The crises appeared to become the real opportunity to rise gas prices for Ukraine and to get extra-profits.

Conclusion 2. The Gas Cold War was artificially organized.
Of course, Ukraine could sign the gas supply agreement with Russia before the New Year and prevent the crisis. Gazprom proposed the price of $250 per tcm, which is acceptable for Ukraine and its economy (in case of proper management of the State Oli and Gas Company Naftogaz Ukraine and fair distribution of up to 18 billion cubic meters of gas the Ukraine is producing by itself every year. The price of $250 is logical: last year Ukraine was paying $179,5 per tcm, and there is an agreement that the price will raise gradually to the European level during three years. It is approximately plus $70-80-90 every year, so, Russians should charge $250 or even more, and it was predictable.

But the gas agreement with Russia was not signed, and the Ukrainian officials who refused to sign the documents were consciously provoking the gas crisis. No agreement – no supplies, even a schoolboy may predict such a situation. Some Naftogaz officials said that the President of Ukraine Viktor Yushchenko prohibited signing of this agreement. It sounds unconvincing, as at that time nobody, including the Prime Minister of Ukraine Yulia Tymoshenko, made any rough statement on this point. It is also very naïve to think that the Gazprom and Naftogaz Ukraine really have communication problems and cannot reach a deal on gas supply to Ukraine. It’s unbelievable even if we take to the account the fact that the Head of Naftogaz Oleg Dubyna is flying in one plane with his Gazprom counterpart Aleksei Miller.

So, the gas crisis was surely staged by Kremlin and by some high authorities in Ukraine. Viktor Yushchenko is not among them, though he didn’t do anything (he could do a lot) to prevent the Gas Cold War. I would also add that the Head of Naftogaz Ukraine Oleg Dubyna was appointed to his position by the Yulia Tymoshenko’s quota, and that he is in very close relations with the Industrial Union of Donbass business group, which has permanent conflict of interests with “gas trade middleman” Dmytro Firtash who controls half of the “RosUkrEnergo” intermediate company.

Conclusion 3. In frames of Ukrainian domestic politics the gas crisis played not in favour of President Yushchenko.
Everyone might notice that the President of Ukraine was trying not to be involved into the gas crisis from the very start. He was mentioned a lot by all the participants of the negotiations (in positive and negative manner), he made some phone calls to his counterparts in Europe and to Russian President Dmitriy Medvedev, but he was avoiding to get inside the negotiations and discussions by himself. Why? It seems that he has a very vulnerable position, when one is talking about the gas supply question. During his Presidency, Mr. Yushchenko has been accused a lot of times in having some profits from the work of the RosUkrEnergo. In particular some people were accusing Mr. Firtash in paying some bills for Kateryna Chumachenko, the wife of the President. These accusations were never proved, but also never dishonoured, though Viktor Yushchenko could for example appeal to courts. If these accusations were true (even semi-true), Viktor Yushchenko is going to lose one of the main sources of his financial support before the Presidential election. By the way, some of the money may be re-transferred in favour of Mrs. Tymoshenko, if we just hypothetically assume that the Itera Company of Igor Makarov may come back to the big gas-supply scene as some people say.

Conclusion 4. The main loser of the Cold War is Ukraine as a country, its economy, and the State oil and gas company Naftogaz Ukraine (but not the current management of this company).
In the geopolitical sense the image of Ukraine as a country (and as a democratic country in particular) has suffered a lot. The New Cold War has demonstrated that Ukraine is totally unpredictable, since the actions of its authorities and state companies are based on the today’s interests of domestic politics, rather than on long-term programmes or interests of the country. Despite of the declarations about the dedication to the democratic ideals and the European course of current leaders of Ukraine, they showed up as a real threat to Europe, European economy and even to the health of the citizens of the European States.

The State Oil and Gas Company Naftogaz Ukraine is close to bankruptcy today. Though I am sure that with normal management this company may easily become a mail financial supplier of Ukrainian budget. (I was trying to make some calculations earlier, and maybe will publish the results here one day, of course, after careful self-proof-reading).

Conclusion 5. The intermediate gas supply company RosUkrEnergo may seem to be a loser, but is not.
The intermediate company RosUkrEnergo also may be considered as a loser in the New Cold War as it will probably be eliminated from Russia-Ukraine gas trade scheme. But I don’t think this statement is true, taking to the account billions dollars of profit RosUkrEnergo had received during the last four years, operating in the sphere of the re-export of gas from Russia to Ukraine and Europe (Hungary, Romania, Poland and Slovakia) and gas trade inside the domestic market of Ukraine. Half owned by Gazprom, RosUkrEnergo was founded as a temporary source of profits, and now it’s just a time for something new. I will not be surprised if Mr. Firtash would be among founders of a new gas trade company who will operate on European – and Ukrainian – markets in coming years.

Conclusion 6. The Europe, still suffering from lack of gas supply, may be considered as a loser also, and the object of manipulation as well.

Conclusion 7. The Cold War is an evidence of a betrayal of the interests of Ukraine by its highest authorities – President, Prime Minister, and Head of State Oil and Gas Company. Their actions and failure to act as well may be called as a high treason with all the consequences it should cause.


elmer said...

What gives roosha/Gazprom the right to simply cut off the gas to Germany and other countries if it has a dispute with Ukraine, even if roosha thinks that Ukraine is "stealing" gas?

roosha's actions are barbaric.

roosha signed contracts all over Europe for the delivery of gas, which it has not honored.

The civilized thing to do, if roosha has a complaint against Ukraine, is to sue Ukraine in an appropriate forum, and to prove its claims, and recover a money judgment.

Not arbitrarily cut off gas, dishonor its contracts with Germany and all the other countries, and let people freeze to death.

elmer said...

I would like to suggest that you take a look at this analysis, "Putin Mishandles Another Gas Conflict" at the Eurasis Daily Monitor.

The conclusions there are that Putin thoroughly blundered, Medvedev is irrelevant, and after Georgia, there is no way that roosha can convince the EU that it is a reliable partner.

In other words, the conclusions there are diametrically opposed to yours, although they don't get into as much detail as you did in the internal politics of Ukraine.

Plus - even a monopolist, at some point, must recognize the ability of a customer to pay while trying to extract the highest price possible. Elementary law of economics.

Alex said...

Seven ways of stealing from budget

1. "Make an order".
Speed limiters, for instance. Do you know why they appeared recently? And why they are being mounted three or even four in a row? The answer is very simple: capital authorities pay Uah 50000 for mounting the single one, while wholesale cost of it is Uah 300. They earn 100 times including installations maintenance. Sudden replacement of old traffic lights that took place all over Kiev hardly could be explained by sudden care of pedestrians ‘cause no "zebra" markings were refreshed .