Ukrainian Natural Gas Crisis Drags On

The Russian/Ukranian problems seem to continue. There is talk that the Ukraine is on the brink of bankruptcy:

How can this be good for gas supplies for the rest of Europe?

We read:

Serbian power grid overloaded amid gas dispute

BELGRADE, Serbia (AP) — Serbia's government is warning that its power grid is getting overloaded, as thousands switch to electricity for heating amid gas shortages caused by the Russia-Ukraine energy dispute. Authorities said the capital Belgrade is facing increased air pollution as residents and businesses switch from using natural gas to oil for heat.

Gas Crisis Causes Political Turmoil in Ukraine

Opposition parties in Ukraine are pressing for the resignation of the Government over the row with Russia that has left the country without gas supplies for two weeks.

As local authorities reduced heating and water supplies, there has been growing resentment on the streets and now there are calls to start impeachment proceedings against President Viktor Yushchenko.

The head of the Regions party, Viktor Yanukovich has called for a special commission to investigate what he called the authorities’ abuse of power over gas supply issues.

Yushenko faces impeachment scare:

Ukraine sees Russian power grab in gas dispute

WISLA, Poland (AP) — The Ukrainian president says Russia is using a gas dispute that has deprived Europe of energy supplies in winter to gain control of Ukraine's gas transit network.

Viktor Yushchenko says Russia's gas monopoly Gazprom wants to charge the former Soviet republic an unjustly high price in order to drive it into debt and later acquire a stake in its pipeline network.

. . . Much of Europe is heavily dependent on Russian gas that is shipped primarily through Ukraine. Russia briefly restarted sending gas through Ukraine on Tuesday but then accused Ukraine of blocking its flow to Europe. Ukraine said Russia deliberately chose a pipeline route that would force Ukraine to cut off domestic users before the gas could reach Europe.

Should we be treating Russia Today as an unbiased source? Surely they will spin it to their side, just like they do the Georgia/Ossetia conflict. Journalists have left the organization because of bias.

Couldn't this just be a rumor campaign to try to stampede some of Ukraine's investors? Propaganda can be a powerful weapon; how many of Russia's media outlets are not controlled by the state?

You don't have much choice. Almost all English-language media is at loss, they do not know what to write about the fast-changing situation.
Latest development:
Gazprom offers Slovakia gas swap to ease crisis
Gazprom offers gas swap to Ukraine

I am hoping other can offer whatever links they can find.

It is difficult to figure out what is happening. With all of our financial problems today, it seems like we are going to seem more and more businesses and whole countries on the edge of bankruptcy. We need to do whatever detective work we can.

Links to active discussions: 36 pages in English with Eastern European members among others. 346 pages in Russian with Russian/Ukrainian/Crimean members.

It's time to call out US agit/prop.

I'm a media scholar and I'll take RT over the NYT/WSJ
all day long.

Does everyone here need reminding that Judith Miller is still
welcome on FOX?

Or that Georgia did indeed start the S Ossetia Fiasco
contrary to the US MEDIA?

And don't even get me started about the one topic that has studiously
NOT been mentioned here at TOD for the last three weeks.

Could you elaborate, which topic was TOD avoiding to mention?

If the western media doesn't spew it then it is not "fact", eh?

I think what was implied was the opposite - that just because a non-western media outlet said it, it isn't necessarily any more likely to be a good source.
(ie, this source could be just as bad as anything in the west)

That's some thick and rich shite you are peddling there. Why don't you explain why CNN was showing film of Tskhinvali and claiming it was Gori. Also tell the world how Human Rights Watch was able to assess the Ossetian death toll via telephone calls! HRW was also trying to claim that some cluster bomb casings it found were Russian when in fact they were Israeli used by the Georgians against Russian forces. Western propaganda is number one in the world.

This marks the 25th anniversary of "1984"...

Have you posted anything here except how saintly Russia is being abused at every turn by the evil evil west? I'm sincerely interested in what else you have to say about energy matters.

Yushchenko insists on gas price of $205 for Ukraine
21:35 | 14/ 01/ 2009

WARSAW, January 14 (RIA Novosti) - President Viktor Yushchenko has insisted that Ukraine should pay $205 per 1,000 cubic meters for Russian gas and said the price for Slovakia should be no higher than $218.

"Subtracting the transit fee from the price Germany pays for Russian gas, the gas price for Ukraine should be $205 at the entry point in 2009," said Yushchenko, currently on a one-day working visit to Poland.

Russian energy giant Gazprom earlier said that since Ukraine had refused an earlier preferential price of $250 per 1,000 cubic meters it would now have to pay "the average European market price of $450-470."

Polish President Lech Kaczynski supported his Ukrainian counterpart saying that "the gas crisis that has swept Europe is linked to Russian policies."

Gazprom gave the go-ahead on Tuesday morning to resume gas deliveries via Ukraine, halted January 7 over a dispute with Kiev. However, no Russian gas was delivered through Ukraine to European consumers leading Moscow to accuse Kiev of blocking the gas deliveries.

Yushchenko denied on Tuesday that Kiev was blocking Russian gas transits to Europe or stealing gas, following a failure by Russia to make a test delivery through Ukraine.


Truth hurts, don't it sunshine.

Of course, if you fully believe in lassiez faire economics then the market price for the Ukraine is whatever it can get Russia to agree to in return for Russia being able to access its export markets. Simply a case of using a negotiating position.

Of course, had the western countries/EU spend the last decade doing constructive things - helping build up the economies of ex soviet bloc countries, building nuclear plants, eventually moving towards adding Russia to the EU, then this problem wouldn't be happening.

Will Stewart - you complain about Russia Today being biased, and then offer up links to two Ukrainian news organizations and the BBC? I for one think the BBC is just as biased as RT.

A couple of years ago I was staying in the hotel overlooking Independence Square in Kiev, and I could turn on my TV to watch RT or CNN and thus compare their news coverage of events in Kiev with what I could see with my own eyes. I was amazed by how similar RT and CNN were. Basically, when the Oranges (the US/UK friendly party) were protesting in the square CNN covered it non-stop and RT had no coverage. When the Blues (the Russian friendly party) were protesting in the square, RT covered it non-stop and there wasn't a whisper of coverage on CNN.

I became convinced that RT is modeled on CNN - they don't lie, they just subtly slant the coverage to be pro-russian. They "lie" by not discussing events or facts that are not in line with what they want their viewers to think. (As do western media outlets - when I asked a US newspaper correspondent I met in Russia why her and her colleagues never mentioned that Edward Liminov is a neo-nazi, she looked at me angrily and responded "He's getting better.")

Thanks, you made my point. And I was responding with the other side of the story to the request;

I am hoping others can offer whatever links they can find.

I was amazed by the coverage in Western media of the latest parliamentary election. Especially this picture from BBC:

Opposition leaders like Garry Kasparov drew a big cross on their ballot papers - their verdict on what they call a rigged election.

Although they were pictured together, BBC never mentioned Limonov's name, only Kasparov's. I think they didn't find correct words to explain to their audiences why "the beacon of democracy" Kasparov is allied with the neo-nazi.

After this picture, BBC forever holds a stigma of propaganda in my eyes.

Kasparov has big name recognition in the UK because he plays chess. Limonov is a complete unknown. The BBC is hopelessly dumbed down, they are not interested in Russian politics. They report the antics of retired chess players or retired cricketers.

In comparison to American and British media outlets RT is free and fair.

On this particular subject, their slant seems clearly biased towards Russian interests. So if they are 'free and fair' on topics of little to no international importance, and not on the important international issues, why should we pay any attention to them here?

Have you read WSJ, Guardian, telegraph, BBC, NYT coverage of the following events:
1. Litvinenko Death
2. BP row
3. South Ossetia.

The reporting on items 1&2 were biased. The reporting of item 3 was filled with outright lies in attempt to paint Russia as the "Aggressor".

Compare RTs coverage of the South Ossetia conflict with what is currently leaked out on the back page of the above media outlets. You will find RT was right from the start.

My point is not that RT is not biased, of course it is - like all media outlets. You probably read BBC and Telegraphs version of the BP row, why would you not read RTs version of the gas row.

why would you not read RTs version of the gas row

I'd just as soon read an coal company report on global warming.

Of course, there's always some value in seeing one side of an argument, and we seem to be getting that from RT. Your claims about WSJ, NYT, et al are unsupported assertions. I'm sure Russian media had very different spins, at least on 1 and 3.

"I'd just as soon read an coal company report on global warming."

This immediately reveals your irrational bias - no need to further discuss this topic with you.

My claims about WSJ, NYT et al are not assertions, they all have published articles recently showing that Georgia was the instigator/aggressor recently. All these articles match the version of events reported by RT at the time of the conflict

Your claims are unsupported assertions until you support them.

Eyeballing Euan's chart for Russian gas production, it looks like their production in 2007 was around 610 BCM/year, with consumption of about 430 BCM/year (net exports of around 180), so consumption was around 70% of production.

High consumption as a percentage of production is the single biggest factor that affects net exports, when production starts falling (the UK and Indonesia both had oil consumption equal to about 50% of production at their final peaks, and they went to zero net exports in seven years and eight years respectively).

In any case, the EIA shows Russian natural gas consumption increasing at about +2.4%/year in recent years.

(edited to correct a math mistake)

For the sake of argument, let's assume a production decline rate of -2.5%/year (partly related to declining casinghead gas production) and a consumption rate of increase of +2.5%/year for Russian natural gas. Starting from the numbers above, in 2012, their production would be 538 BCM/year, with consumption of 487 BCM/year, leaving net exports of 51 BCM/year, a net export decline rate of -25%/year, over five year period.

If we assume flat production, with rising consumption of +2.5%/year, net exports would drop at about -7%/year, over a five year period.

Here is Euan's Chart:

No matter what combination of countries you use, exports are not doing very well in that part of the world:

Part of the problem is that production is not growing very rapidly -- less than 2% per year recently. Consumption is growing as well. There won't be enough left to meet Europe's growing needs for very long--this year, next year?

It's the same problem for the four countries total as we see just for Russia--a thin margin between consumption and production, which can have a disastrous impact on net exports, especially in a cold winter.

That graph is about consumption only. It has nothing to do with production limitations. It's natural gas so it will not be produced unless there is a demand for it. So when demand goes down so will the production.

If you take a look at say a Ford you will see that right now number of manufactured cars is much fewer then a year ago. That does not mean that Ford is unable to produce anymore. It means that there is a problem with demand. This dependency is even more pronounced with natural gas. You can store cars fairly easily, not so with natural gas.

The theme here is that it must be Russia's fault one way or another. Talking about gas shortages in Russia in 2009 is ridiculous. We have not timewarped to 2020.

That's what most major oil companies reportedly said about the North Sea in the late Nineties, it would peak some time after 2009 (production has declined at -4.5%/year since 1999).

In any case, I'm afraid the net export math is relentless. With a thin margin of supply in excess of consumption, it doesn't take much of a problem with supply (cold weather interruptions to casinghead gas for example) plus spiking demand due to very cold weather to cause a problem with net exports. It's no one's fault per se (no more than it was the UK's "fault" that their net oil exports went to zero in seven years), it's just math.

For the sake of argument, if Russian natural gas production fell at -2.5%/year, for one year, and consumption increased at +2.5%/year, for one year, their net natural gas exports would fall at -15.6%/year, from about 180 BCM/year to 154 BCM/year, in one year.

The issue is that in 2008 and 2009 there is no production drop and domestic demand is not increasing thanks to the recession. Your model is correct for the long term and like I said many times there will be a problem by 2020, but not by 2012 or even 2016. Tymoshenko has just announced that paying market rates (i.e. over $400 per tcm) is completely unacceptable. This IS the problem. Not the process gas, not transit fees but the price Ukraine refuses to pay for gas since it will destroy their re-sale racket.

To carry your argument to its logical conclusion, the -4%/year decline in Texas oil production since 1972 and the -4.5%/year decline in North Sea oil production since 1999 was due to a decline in demand for Texas oil and for North Sea oil?

Or is it your argument that only Russian natural gas reservoirs approach infinite size? If the demand for Russian natural gas was 1,000, 10,000 or 100,000 BCM per year, Russia would simply increase their production to infinity and beyond?

I did not say that Russia has 1000 year supply of gas or 1 year supply of gas. I know that neither I not you know the true size of their reserve. But it completely illogical to look at the demand picture and to try to see it as in the magic ball what the supply situation is. Oil is obviously completely different. We both know that it's traded with floating price (and there is some elasticity) and is very fungible.

Jeffrey, I tend to agree that Russian productive capacity might lie behind this dispute - though Jerome disagrees here. Russia has potential to become a classic export land casualty in gas supplies. My gut feel is that with cold weather, Russia is struggling to meet
all commitments and understandably are picking on Ukraine, who by all accounts are sequestering transit gas for their own needs. Near bankrupt Ukraine has no possibility of paying, and so I think the only way to unlock this is for the EU to start paying for the Ukraine's gas.

Germany, Italy and France all have large gas storage and won't begin to hurt for a good while yet. UK storage on the other hand is well on its way down and if our cold winter weather continues into February - well lets say it will be interesting.

Curious thing though, with a number of E European countries without gas at present, and likely suffering quite badly, this story has not been on our TV news.

Even if we assume slowly increasing dry natural gas production, it's plausible that a decline in casinghead gas would offset the dry gas increase, leaving flat or declining total gas production.

But the key point is the thin margin, about 30% in 2007, between consumption and production. Small adverse changes in production, with any increase in consumption (especially during a cold winter), would have a large impact on net exports

If we go back to my little Export Land Model, and if consumption was 70% of production at final peak (instead of 50%), with a production decline rate of -5%/year and a consumption increase of +2.5%/year, Export Land would go to zero net oil exports in about 5 years, instead of 9 years.

"this story has not been on our TV news."

And combined with

dissident on January 14, 2009 - 6:55pm Permalink | Subthread | Parent | [Parent subthread ] Comments top

"The EU was playing it (quiet) at first and is now making threats because it is not an innocent party in the conflict. The EU directly benefited from Ukraine theft and re-sale of Russian gas over the past 15 years. So the EU does not want Ukraine to pay full market price for Russian gas and as long as Russian gas is forced to go through Ukrainian territory it is subject to theft. At this stage Russia should insist on running dollar meters instead of gas meters on its side of the border: only volumes contracted for sale should be shipped. If Ukraine steals the gas then the victims of the theft will have to deal with this absurd basket case "nation".

The US wants Russia to now subsidize NATO's entrance into
the Ukraine. And does everyone also realize the Ukraine
will have to upgrade it's military to NATO standards?

This is a non starter for Russia. Imagine Alaska wanting
to join the SCO and DC's reaction.

The BBC and ITV news last night reported on the Czech government's stewardship of the EU, and in particular a modern sculpture they had commissioned portraying the French as always on strike, the germans with Nazi insignia and the UK absent from Europe - maybe they know something. Not a whisper of Ukraine - Russia and E Europe caught up in a new cold war.

I imagine the current situation may suit the UK government well, since when we potentially run low on nat gas next month (re Rune's posts) this dispute may provide cover for the ugly reality of the precarious state of our gas supplies.

At some point we need to work out how long German gas storage will last.

Sounds like the Czechs have a good sense of humour, but the French aren't on strike when they are on holiday or out to lunch or visitng their mistresses so that's probably only half the time:-)

Why the heck is the UK sending gas to Europe when we have the smallest storage of our near neighbours?

I assume the gas pipeline through Poland is running full pelt, has any other country other than Ukraine had their gas cut? No, of course I don't mean any country downstream of Ukraine! How about Estonia? Do they still qualify for mates rates even though they are not friendly towards the bear or are they paying market rates??

I thought the Germans had about 90 days supplies so should be good for a couple of months yet??

I like the portrait of Sweden, a flat IKEA box with a Gripen wing.

I am astonished that nobody is explaining clearly what the prices are for Ukraine from Gazprom (Russia) and what are the market prices.

If they decided for the "orange revolution" to go to capitalism and free market, they should abide to these rules. And those encouraging them, should take care now of their baby not going into bankruptcy. It could be a terrible crash course on fast track to capitalism.

I fully agree with the comment that the manger and trough Western press does not know how to get rid of this problem or how to treat it. All the current alibis on democracy and some other values are being rapidly dismantled by a crude reality.

I am also astonished to observe how stupid and overbearing some Western leaders may be. They are saying to their Western consumerist audience that they will take “firm steps” against Russia, but they are fully caught by the gas bubbles. They so heavily depend on the Russian gas and oil , that they look pathetic, when threatening Russia with “taking serious measures”

Capitalism has collapsed, like many of the barracks in the Gaza concentration and extermination camp and still the Western leaders believe that things in the future will be handled and manipulated from the stock exchange markets, as usual. This time it seems that is going to be quite different. Basic, row materials, will count first and among them energy sources with high EROEI content will be a tool more powerful than WMD.

In fact, a full more winter in Northern and Central Europe without 50 to 70% of natural gas they are consuming and the death toll may count perhaps as high as in all the WWII. Beware of the Russian gas. Europeans are in their hands. And Russians very well know it. The European leaders seem to be still dreaming with financial controls and are apparently as unaware and indifferent to the problem, as Bush on the situation of the whole world during his mandate.

"RBC, 14.01.2009, Moscow 16:32:48.Ukraine has suggested that Gazprom give it $700m "as a present" to restore the flow of gas through its territory, the Russian energy monopoly's CEO Alexei Miller said during today's meeting with Russian President Dmitry Medvedev. He explained that Ukraine had demanded that Gazprom provide it with 360m cubic meters of gas free-of-charge in January, and 600m cubic meters in both February and March. Ukraine is perfectly capable of resuming the transit without this gas, Miller stressed, as Naftogaz of Ukraine could use domestically produced fuel, or gas from its underground storages, or buy the amount of gas necessary for this purpose."

Consider the price of nat gas Gazprom sells domestic. Stalin era-old gas fired power plants pay the equivalent of 70 US$/1000m³ ,
Putin's favorite Oligarchs for ex. Norilsk Nickel smelters, pay 50 US$. Due to sky rocketing inflation Putin has ordered a temporary freeze of gas prices for private users.
Gazprom is as well at the brink of bankruptcy as Ukraine is.

However: as goes oil so goes Russia, and now as goes Gazprom, so goes Russia.

Maybe you can tell us more about Norilsk Nickel gas supply? I can do it for you. The main supplier is NorilskGazprom. The sole purpose of existance of the company is supplying Norilsk city and the smelter with natural gas. It has three producing gas fields 300km away from Norilsk. It is not connected to any national transportation networks. Basically, it's in the middle of nowhere above Arctic Circle. In that conditions, money doesn't really matter.
And do you know how Norilsk Nickel transports its goods to world markets?

Russia has every right to subsidize its domestic industry. It also has every right not to subsidize the industries of foreign states. This is called sovereignty. The arguments being trotted out to excuse the Ukrainian hijacking of Russian gas are simply incredible.

The medieval Kremlin Oligarch Mafia regime should be deprived of whatsoever "rights".
What is the fair price for Gazprom gas? Is it a best guess?
Not at all.
Take the average price of Urals crude from Oct to Dec 2008 compute
the price in terms of mmBTU then factor in mmBTU/m³ and you'll get
196 US$/1000 m³ of precious Gazprom gas.
That is the market price. Not 450 US$/ 1000m³.
As the EU is unable to speak up in one voice politically and economically it is the European customer who subsidizes Oligarch "enterprises".
EU must cancel North stream and South stream and move towards a LNG spot market.

Brilliant post. 100% pure russophobia.

Hate will get you nowhere.

Russophobia? Not at all. The people of Russia do not deserve criminal Oligarchs. The rest of the world doesn't either.

And how exactly the people of Russia will benefit if the Russian government drops support for domestic industry? How the people of Russia will benefit if gas prices for private users will skyrocket? ...if Gazprom starts selling gas for $196? ...if Gazprom goes bankrupt? ...if Russia goes bankrupt?
I saw all of the above in your posts, that's why I call you russophobe.

The PM self proclaimed strongman Putin is responsible to solve that problem. If he gives evidence of cluelessness the people of Russia should act accordingly.

..if Russia goes bankrupt..

Ah, you have a short memory.
Russia DID go bankrupt in 1998.
The West bailed you out.

The Europeans know how you manage your 'friends' and they fear you.
A wolfish Russia is a curse on all its neighbors and on it's own people.

During their heyday, the Mongols usually attacked their enemies in the dead of winter over frozen rivers which is pretty much what Gazprom-Kremlin is up to.

The Greater Russia/Putin worshipers posting here are simply a revival of the Czarist ultranationalist Black Hundreds.

Exile Russians are certainly not favoring Putin and his Oligarch friends as they see it as Neo-Czarism. However they ask how can one be self proclaimed nationalist if he dubs stupid gangsters "economical leaders" instead of file criminal lawsuit on them?
Chodorkowsky ok. but what about the rest of 99 others?

Putin is overwhelmingly popular among ex-pat Russians excluding those who immigrated in the 80s and early 90s for political reasons.

You could say that the West bailed out Russia in 1998. But you could also say that the primary reason Russia went bankrupt in 1998 was because of failed policies pushed on them via Chicago School economic theory, who recommended "shock therapy" ... which is perhaps one reason you find such animosity from Russophiles on this forum.

One of those fellows, Jeffrey Sachs, appears to have regretted his advice later on, but his advice was definitely destructive and born out of a certain arrogance and lack of empathy--typical of economists, I'm afraid--for what regular people were going to have to endure as a result of their advice.

I would add that the CFR, via a group headed by Volcker and Graham Allison no less, recommended in 2000 that Russia do just what everyone is up in arms about today--that is, re-nationalize the industries taken over by the oligarchs. Putin has followed that advice, whether or not he was aware of the advice per se, so there should be some defenders in the US press for this particular policy, but none have made the light of day, for whatever reason.


In terms of market price, no one really has the contract information, but if it were based on the average price for 2008 (CL or Brent), which is over $100/b, that would be north of $400/tcm. But we don't know if there was a ceiling, a floor, based on Urals, dated Brent, BWAVE, or CL, and no one's talking. So we're all taking it on faith until someone gives us the contract terms ... which seem awful pertinent to the discussion and which apparently will remain out of the public domain for whatever reason. (I'd doubt that the Urals price would be used, given no credible futures contract for the stream(s).)

In case of EU the contracts are opaque. The contracts are negotiated between the main importers of nat gas such as Gas de France, E.On,
RWE , and exporters of the commodity. For unknown reasons, Gazprom gets higher prices than for ex. Norway's statoil.
The advantages for the exporter are obvious. The only advantage for the importer is security of supply which however is not a fact in terms of Gazprom. At least not presently.
The present gas struggle must be seen in a wider context, the elements to consider are: Nabucco pipeline and Georgia, Putin's GAZ OPEC proposal, and the advent of LNG.
The European main importers have been lobbying against a free gas spot market based on LNG much in favor of Gazprom. However gradually Russia
fell off grace and LNG supply from various sites in Africa , South America, and the Arab peninsular -Quatar and even Iran - entered EU politics' focus. Gazprom sent Putin on a round trip to promote GAZ OPEC
and suddenly opted to cease the peg of nat gas to oil.
In a strategic response EU politics decided somehow Russia's energy monopoly has to be considerably weakened.
The main reason that Russia lost benevolent attention was Georgia.
Georgia transit plays a particular role in the Nabucca gas pipleline
project for nat gas from Caspian sea. Israel is the main driver of the Nabucco projct. Of course it is hard to believe that Putin would give a Russian Kopek on the folks of South Ossetia.
So what we see now is imo masterminded and same as Putin stumbled right into the South Ossetia trap he fell into the next trap. German chancellor Merkel and Ukraine gas princess Timochenko are kind of bosom friends. I think Gazprom and Russia will loose the game eventually.

The show goes on...
Strongman Putin should be advised
The Life of Al Capone or such.
In a fight between criminals - all of his beloved Oligarchs are the worst criminals Russia has ever had after the Czars- it doesn't matter at all who is the most clever, it matters who pulls the trigger first.

Ukrainian PM accused of personal bias in gas business

RBC, 16.01.2009, Kiev 14:58:49.The Ukrainian Presidential Secretariat has asked the General Prosecutor's Office and the Ukrainian Security Service (SBU) to check on reports that Prime Minister Yulia Timoshenko is lobbying personal interests in the natural gas sector, the Ukrainian presidential press office reported today citing the secretariat's deputy chief Igor Pukshin. According to Pukshin, all the scandalous statements indicate that Timoshenko, abusing the office, is doing her best to promote to the European gas market the Switzerland-registered FKPtt Universal Swissland, which is to obtain a considerable amount of Russian fuel. It should also be noted, he added, that the co-owners of this company are Timoshenko's close partners Viktor Medvedchuk and Igor Bakai. Pukshin also emphasized Timoshenko's aggressive opposition to the gas trading company RosUkrEnergo, a direct competitor of the Swiss company.

Yes, we DID go bankrupt in 1998. And you know what? We didn't like it.
But armchair russophobes from the West are trying to convince me that if Putin's Russia goes bankrupt, it'll somehow be good for the people of Russia. I fail to see the logic. But I understand that they want me and my family to be harmed just because they don't like Putin's face.

I'm not here to promote any agenda. I've learnt a lot from this site, now I'm trying to contribute something. Since I live in Russia, I can tell you something about Russia. If you don't want to listen, well, feel free to ignore my comments.

Spare me your paranoia and hurt feelings!
Russia can be an ENORMOUS positive in the world and toward Europe in particular.
When Germany was in the throes of ultranationalism it threatened Europe in the same way. The Germans have abandoned that mentality and are now a force for good in the world, same with the Japanese.
American pretensions to play sole superpower have resulted in disaster.
If the Russian leadership decided to fairly work with Europe on an equal footing based on the rule of law both would benefit greatly.
If you think I want Russia to fail you're wrong. I want the Russian people to have all the freedom and prosperity people in the EU have but that freedom and prosperity comes with cooperation and fair dealing(though the way never as smooth as it might be).
The West is now in trouble. One would think that 'Russia' would feel some sympathy but instead there is icy indifference and indeed,gloating.

If the Russian leadership decided to fairly work with Europe on an equal footing based on the rule of law both would benefit greatly.

Funny - Russia does exactly that. Or at least it says it does. It has signed cotract and it does everything contract says. Ukraine says it needs "technical gas" and alternates between demanding it for free ot getting it without contract (we'll sign some contract later - like it worked last 10 years, right?).

It's hard to say if Russia is right or not - court will decide (if even then: court is biased too - it's European court and while it's supposed to be objective it's hard to be objective if you've seen one-sided picture of the story in TV for weeks before process started), but AFAICS Russia tries relentlessly to push gas to the Ukraine thus at least last few days are without flaw. Russia does not want to send unmetered and unpaid "technical gas" to Ukraine - but then contract does not say anything about "technical gas"...

The West is now in trouble. One would think that 'Russia' would feel some sympathy but instead there is icy indifference and indeed,gloating.

Just like when USSR was in trouble 10-15 years ago. Europe sure helped back then - but can you cite situations where it gave Russia something without conpensation and/or contract? Just to compare today's Ukraine's demand with Russia's demand back then.

I remember loans, I remember some humanitarian aid (I'm sure Russia will offer that too if needed), I don't remember stuff worth billions sent Russian way without conpensation or signed papers back then.

Why Russia should treat West when it's in trouble better differently from how West treated troubled USSR?

Of course.
It's all a plot to 'dictate' to Russia--of course Russia doesn't dictates, it negotiates.
Poor Russia!
Here's good old Russia cutting of gas supplies in the dead of winter to Europe because they want a new price from their brother CIS member, Ukraine. In many cases, such an embargo could be considered an act of war but because Russia is strong, with many thousands of hydrogen bombs the greeding Western dogs must beg.

It's simple.

'Let them hate so long as they obey'.

On this, VV Putin and the Roman Emperor Caligula seem to agree.

If you want to negotiate, negotiate.
If you want to dictate, keep on dictating.

Here's good old Russia cutting of gas supplies in the dead of winter to Europe because they want a new price from their brother CIS member, Ukraine.

I never said Russia was good. But it learned lessons of 1990th very well. It only did to Ukraine what West did to USSR when it was bankrupt. In case of USSR it was low price of oil and lack of money for grain - West never budged and USSR is history now. Today the history is repeated with Ukraine - instead of grain Ukraine needs gas and it's essentionally bankrupt.

In many cases, such an embargo could be considered an act of war but because Russia is strong, with many thousands of hydrogen bombs the greeding Western dogs must beg.

Yes, but somehow when West is doing this it never perceived as such. Funny, that.

'Let them hate so long as they obey'.

Yup. West did it to USSR and Russia many-many times, now Russia does it to West - that's just life.

Wow Majorian you have outdone yourself here:

1. The west particulary the USA and also Germany are not a "force for good in the world" This very statement reveals your childlike intellect. Western Actions have brought disaster to the people of Iraq, Palestine and Afghanistan and in general have created mayhem and misery throughout the world.

2. Russian leadership has worked fairly with Europe and acted stricly in accordance with the rule of law, only to have their concerns pushed aside.

Don't Worry, Russian people have all the freedom and prosperity people in Europe have and within 10 years it will be much richer.

Market price is not decided this way, sorry. What you are proposing are "fair price", "reasonable price", NOT market price. Russia says it can sell gas for $400 - and apparently Germany and some other countries are ready to pay this price. It makes said price "market price", nothing else.

Now, it's true that "gas price" and "market price" should not meet in a single sentence: there are no free market for gas, but that does not mean you can mechanically calculate price using your formula.

Well it is up to a common EU economical politics to abandon pegging
price of nat gas to price of crude. The market price, if these two forms of fossile energy compete, is day by day determined at Henry hub.
That's the way to determine prices.
The negotiated price of gas EU pays for Russian gas is absurd by any means. A negotiated price is not a fair price and not market price because it is negotiated upon fixed rules.
Now what determines the price of crude?
Russia made a fortune on contango and continuous rollover of future contracts. Now rollover has stopped but contango persists and they cannot handle this situation. They sell oil physical upon demand.

In plain words pegging gas to crude has always been a political nonsense. I am convinced that will change if not 2009 then 2010.
Stop feeding russian Oligarchs.

besides spewing childish insult and lies do you have anything intelligent to offer? LNG is much more expensive than pipeline gas because of the infrastructure required. Russia is not afraid of LNG, in fact they are considering canceling the Nord Stream project and producing LNG from this source. Actually the best long-term course of action and the one that will eventually result is for Russia to gradually cease all exports of oil and gas. Russia has enough O and G to last for centuries while Western Europe and USA does not. Eventually the Russian people and politicians will demand the cessation of oil and gas exports as they will want to save it for future generations. Good luck with the solar and wind farms.

The EU was playing it quite at first and is now making threats because it is not an innocent party in the conflict. The EU directly benefited from Ukraine theft and re-sale of Russian gas over the past 15 years. So the EU does not want Ukraine to pay full market price for Russian gas and as long as Russian gas is forced to go through Ukrainian territory it is subject to theft. At this stage Russia should insist on running dollar meters instead of gas meters on its side of the border: only volumes contracted for sale should be shipped. If Ukraine steals the gas then the victims of the theft will have to deal with this absurd basket case "nation".

Hello TODers,

One wonders how different the situation could be right now if the whole world had wisely gone to full-on Peak Outreach plus adopted some form of Colin Campbell's Depletion Protocol starting way back in 1996:

With this Russia/Ukraine/Europe natgas problem getting ugly: let's hope that the involved leaders come to realize that BAU won't work on the Hubbert Downslope.

The FT has a slideshow on the effects of the gas shortages in Sofia, Bulgaria. That part of Europe is freezing.

And this is litmus test. If Russia will view these pictures and cave - then the whole hoopla was for nothing and West will continue to dictate rules of the game.

Russia must continue with it's "market decides everything" approach. Oh, sure, they can send emergency humanitarian help, clothes, etc - just no gas. Gas will be sent once agreement is signed and dispute is resolved. The same approach West applied over 10 years ago when USSR was in similar position to today's Ukraine...

I'm afraid Russian government does not have the willpower to do this :-(

Isn't there an expression about the Soviet always
delivering electricity and gas?

Dmitry Orlov

"Beyond maintaining order and preventing unnecessary bloodshed, the military possesses a property almost unique among government agencies: the ability to execute arbitrary orders, not subject to political authority, not limited to job description, and not subject to questioning, because "an order is an order!" Issuing orders is quicker and easier than legislating, because laws are blunt instruments, and are always subject to interpretation. Don't even try telling a lawyer "A law is a law! Shut up!" It just doesn't work. To get things done in an emergency, it is better to bypass lawyers and courts altogether.

One useful order would be: "Grow potatoes!"


I'm facinated by the people shopping for electric heaters ... how on earth is the grid still up ? Have the majority of people switched to wood or oil easily ? I would have thought the grid would have been overloaded very quickly with everyone plugging in resistance heaters ...
Edit :
"We now use an electric heater, which can only warm a small room. If you turn a second heater on, we get power cuts. We've had quite a few power cuts in the last few days. "

Is it not normal for the owner of the gas to pay for losses in shipment i.e. the 21 mcm of technical gas on 205 mcm flows that the Ukrainians are requesting? Doesn't it seem strange that after having widely reported that it takes 36 hours to transit gas through Ukraine that Gazprom shut it off after just 4 hours on Monday? If the reports are true that they sent only a fraction of the gas down a single line wouldn't the EU monitors have seen this? Has anyone heard of the status of EU monitors in Ukraine?

Is it not normal for the owner of the gas to pay for losses in shipment i.e. the 21 mcm of technical gas on 205 mcm flows that the Ukrainians are requesting?

Yes, but it must be written in the contract. Sometimes it's included in the contract, sometimes not. It's sizable money. It was stupid for the Ukraine to sign the contract without this addition, but the deal is the deal.

Doesn't it seem strange that after having widely reported that it takes 36 hours to transit gas through Ukraine that Gazprom shut it off after just 4 hours on Monday?

The Gazprom knew full well it'll happen. But the question is: what now? The story goes like this: pipe was filled with pressured Russian gas at the end of 2008. When Russia stopped export pressure was lowered. And gas was moved somewhere. It does not matter - where. Was it just lost, was it sold out, whatever. Does not matter - it's not there. Now if Russia resumes export - who should raise the pressure (and spend it's gas): Russia or Ukraine? Both have the abilities to do so, but Russia says "it's internal Unkrainian problem - they lowered pressure, they should raise it back again" and Ukraine says "but Russia needs this raised pressure - it should do so". Russia always used it's own gas to raise the pressure (and both sides spent years bickering about price of gas used for that), but this time Russia said: "sorry, you are mediators - you should manage your own system". I don't know why. Russia showed that gas was "stolen" (and in some sense it was stolen - Ukraine had no other choice) and this was the point of said excercise.

P.S. Ukraine can raise the pressure without Russia - but it's costly operation and it does not want to spend a lot of effort for just a "test run"... Actually it does not want to do it at all - it expects that Russia will send free gas to do it "as usual", but it does have the capability...

Which 4 hours?

All the report I've seen show that Russia is still maintaining the pressure in the pipe hoping that Ukraine will let it though. The issue that pressure is staying constant without addition of any other gas, which means that valve on the Ukrainian side is closed. Ukraine goverment has signed the contract to ship gas and do it for the payment. If it needs any extra gas to transfer any gas it should just buy it, Russia seems to be ready to sell it (but at the market rate).

And finally in any case it does not take anywhere close to 36 hours to have gas to come out at the other end, assuming that no gas has been stolen from that pipe recently. If there is still same amount of gas, then there is still the same pressure. If there is the same pressure, then gas would flow out of the other end very soon.

I believe they turned the gas on at 8 Tuesday then off at noon.

Agreed, if there is gas in pipeline but that is apparently not the case. I believe the discrepancy lies in the fact that the Russians are reported to be sending the gas down a single pipeline leading to their load centers and not via the export network.

The real question is why Russia would turn off the entire network. I cannot think of another commercial situation where a company has halted all transit gas deliveries and claim "force majeure" to their customers in the sincere belief that this was the best way forward.

Europe should impose trade sanctions on both countries.

Eastern Europe was in subzero tempartures and upset over the crisis. A man watched the air from his breath condense like a cloud in his apartment:

Well tonite it will be 5 degrees here.

I've closed off 1/2 of my house and can see my
condensation in there as well.

Shrink your space that you heat.

And wear layered clothing-;} And get some dogs. For
a Three Dog Night.

I can't imagine what it must be like freezing in the dark over there. It's -11 right now according to my desktop widget with a low of -14 for tonight. We wont even hit 0 tomorrow for sure. -4 is the forecast high and -22 is the low for tomorrow night. Wind chills are expected to be as low as -45 degrees. Lots of schools are canceling classes tomorrow. My significant other and I have moved our bedroom upstairs where its warmer and the room is much smaller with a window facing the south (winter sun warms the room during the day). The thermostat is set at 62 degrees and we run the humidifier to try to trap the heat in the air. If we got our natural gas cut off right now we would probably be dead by the end of tomorrow night. This place seems to be very poorly insulated (I rent so its a little beyond my control) and I have put plastic up over the windows to keep the drafts down.

Maybe Iowa isn't the best place to be when TSHTF...

I went to Waterloo as a kid to see the JD Works

It was about 3 above with dirty snow piled high
to the sides.

I remember thinking that I had no desire to live

But the factory tour was neat. ;}

This political situation is a good example of what Jeff Vail presented at ASPO 2008. That geopolitics would be factor in energy accessibility and distribution. Old alliances will be tested and historical animosity between countries and nations rekindled. I am staying in the tropics. Don't fancy freezing the crown jewels off.

Now to the Ukrainian gas-transport system the gas intended for Europe arrives in extremely small volumes, or does not arrive at all. In accordance with the statements of both parties it is practically impossible to understand accurately who has made decision to block this gas – Russia or Ukraine. And the European point of view, on a large scale, in the current moment the main problem is not on of the reason of a fault of arriving gas, but the fact of its absence. Especially it concerns the countries of southeast and central Europe which remained in general without gas. They aspire whenever possible faster resolution of dispute between Ukraine and Russia.

Russian Prime Minister Vladimir Putin’s interview with German Television’s Channel One ARD

Gazprom is one of the biggest Russian companies. That alone means we will give it every support. It is a major employer, with a workforce of 300,000.

As for its contribution to the tax chest, it is considerable, though not as big as you might think at first glance. The oil sector accounts for 40% of the budget revenue, and Gazprom for 5-6%, but Gazprom has big social obligations. First, gas is still sold at a below market price in the domestic market. Even after 2011, when we plan to introduce European prices for industrial consumers, we will keep the prices for households at a fairly low level. By the way, contracts with industrial consumers are already being signed for 2011 proceeding from the European price formula.

RBC touted something like
"Ukrainian presidential press office reported today citing the secretariat's deputy chief Igor Pukshin. According to Pukshin, all the scandalous statements indicate that Timoshenko, abusing the office, is doing her best to promote to the European gas market the Switzerland-registered FKPtt Universal Swissland, which is to obtain a considerable amount of Russian fuel. It should also be noted, he added, that the co-owners of this company are Timoshenko's close partners Viktor Medvedchuk and Igor Bakai. "

Well...who are the other co-owners?
Could it be the former Russian press' bragging about ultra rich Oligarchs was just that, bragging?
Only recently Czar Putin's bosom friend Vekselberg was invested in
FKPtt Universal Swissland. And some more from the Holy Grail round of bold knights in the Kremlin. All big lies, huh?

I've found this, which I haven't seen reported anywhere. If it has, I'm sorry but I want people to read it.