Putin is such a sweetheart.

[Biscuitsmom31]

http://www.usatoday.com/news/world/2009-01-07-russia-gas-europe_N.htm?csp=34

What a guy!

 

[Keli]

I am no fan of Putin but I'm not ready to say this is all his fault. Mainly because the story didn't give enough background. Why is there a price dispute in the first place?
Gas cost the producer a fair amount of money to produce. Are those countries wanting Russia to subsidize their gas costs?
Or does Russia have the ultimate monopoly and taking advantage of that?
I guess I'm just saying I need more info at this point.

 

[pogo791]

Keli, the background is pretty confusing, and there is no clear villain. But Russia (and Putin) is definitely playing hardball, hoping that the Eastern European countries that have had their gas cut off will start pressuring Ukraine to agree to pay higher rates for the gas it gets from Russia.

To try to simplify the background as much as possible:
- Russia exports gas to Ukraine and to a large number of Eastern European countries (Bulgaria, Hungary, Romania, Slovakia and the Balkan countries), which are almost completely dependant on Russia for their energy needs
- the main pipelines go through Ukraine
- the Russian gas company, Gazprom, has a legitimate grievance against Ukraine: Ukraine has constantly been late in its payments
- in addition, there is a $3 billion dollar disagreement between Gazprom and Ukraine over how much Ukraine owes for gas delivered during 2008. Basically, Ukraine has been paying only one half what the other Eastern European countries have been paying, and Gazprom wants to bring the price up closer to the market price (Ukraine is a former SSR, and benefitted from earlier sweetheart deals)
- Ukraine paid what it believed it owed on the last day of 2008. Gazprom says that this wasn't enough, and shut off its deliveries to Ukraine
- however - and this is where it gets a bit sticky - Gazprom continued to send gas through the pipes in Ukraine to the Eastern European countries
- Gazprom now claims that Ukraine has been siphoning off part of the deliveries intended for the Eastern European countries for its own use, and cut off deliveries entirely. (Some Russian gas is reaching Eastern Europe through pipelines running through Belarussia and Poland.)

Politically, Ukraine was hoping that the EU (to which many of the affected Eastern European countries belong) would have come out in support of Ukraine. However, the EU basically has been saying that this is a commercial dispute between two non-EU countries, Russia and Ukraine, and they have to sort it out between themselves.

Presumably, over the next few days the two countries will reach an agreement, on the basis of which Ukraine will pay more for Russian gas, but not as much as Gazprom would like. (After all, the market price has been declining.)

The longer term political implications seem to be bad for Russia, but also not particularly good for Ukraine:
- the EU and in particular Eastern Europe will be trying to diversify their energy imports, so that they are much less dependant on Russia
- Russia is playing hardball at a time when its commercial clout is already weakening
- Ukraine - which has been nervous about Russian actions in Georgia - will see that the EU is not going to rush to its side, no matter what. This may cause internal instability. The country is already pretty much divided between those wanting stronger ties with the West, and those wanting stronger ties with Russia.