About 60 percent of Russia’s budget comes from exporting natural gas westward, through the Ukraine and on to Western Europe. The pipeline has long been a risk, protected only by the potential of Russia to retaliate, and by Russia’s ability to turn the gas off at its source. Earlier today, Russia reduced the flow by about 90 million cubic meters, which is the allocation for the Ukraine’s 46 million people. The issue? Money, of course. Money and control.
Preface: Ukraine ceased importing electricity from Russia on December 1, 2008, after repairs to one of Ukraine’s nuclear reactors were completed.
The Ukraine delivered 1.5 billion dollars on Tuesday, Dec. 30, 2008, and considered their bill settled. Russia’s Gazprom now claims that Ukraine must also pay $600 million in late fees before they will restore the flow of natural gas to the nation, which is in the midst of their coldest months of winter now.
Furthermore, Gazprom is demanding that Ukraine pay
$250 $450 per 1,000 cubic meters in 2009, 40% 250 percent (2.5 times as much) more than the $179 price paid in 2008.* Ukraine says they cannot pay that price unless Russia offsets the increase by paying Ukraine that same amount more for exporting Russia’s gas through their country on to Europe. Russia has promised that they will continue to export gas to Europe without interruption. Russia’s Prime Minister, Vladamir Putin, said that any interference with Russia’s gas exports to Europe would carry “serious consequences for the transit country itself.”
Russia is putting the Ukraine, a former Soviet Union country which has angered Russia by applying for membership in NATO, in the cruel position of having to surrender to the 40% increase or continue to pump gas on through their country to Europe, while they themselves are freezing but taking none of that gas for themselves.
This isn’t the first time Russia has acted against the Ukraine in this fashion. In 2006, Russia halted supplies to Ukraine for three days, in a similar disagreement over prices. When the pressure in the pipeline dropped by that allotment, the decrease was felt all the way to Italy, because the Ukraine continued to draw gas from the pipeline for their winter needs. Apparently they learned from the experience. Ukrainian authorities say they have stockpiled enough gas to hold out for three months, if the weather holds as anticipated.
Russia has perpetual negotiations with nations they supply energy to. Serbia was also in negotiations earlier this year, and Finland managed a stay of prices on wood purchased from Russia, but only after last year’s increases in Russian Export Tariffs caused Finland to reduce their demand by more than half. At the same time, Russia claims they would like to work with NATO (disagreements aside, of course.) It’s hard to avoid comparisons to a national mafia, friendly with speech, brutal and murderous in dealings with those who defy them.
Threatening millions of people in this fashion demonstrates that Russia cannot be trusted. In a time of global financial crisis, to strongarm the Ukraine for a 40% increase is clearly retaliatory and inhumane. It also demonstrates the importance of removing ourselves from dependency upon fossil fuels of all kinds. It was wise of Ukrainian authorities to stockpile the gas against this sort of threat, but their reserves will run out by very early spring, leaving nearly 50 million people freezing and without gas for cooking, heating or hot water, and electric generation. (Ukraine produces about 45% of its electricity via nuclear reactors, but relies upon fossil fuels to generate the remaining 55%, so their electric may be diminished as well.)
Germany, Italy and Turkey were amongst nations which lowered their demand for natural gas after prices were raised to $460-$520 per thousand cubic meters beginning in October of 2008. Despite that decrease in sales, Gazprom reports record revenues of $75 billion to $77 billion this year.
Energy independence is essential for all nations’ people.
*EDITOR’S NOTE: We were previously misinformed. Russia is actually demanding $450 per 1,000 cubic meters, an increase of two and a half times the price paid last year – 250% increase.