EU Collateral Damage in Gas War

January 12th, 2009 | Sources: Economist, NY Times

Subjects:

Every winter it seems, Russia and Ukraine get into a spat about Russian gas supplies, but this year the squabble ballooned into an energy emergency for the entire European Union. 

The EU receives 25% of its gas from Russian gas conglomerate Gazprom via a pipeline coursing through Ukraine.

Ukraine is itself a Gazprom customer and for years it paid less than half the market price for gas. In the fall, the 2 countries agreed that Ukraine would transition slowly to market prices but Ukraine wanted to increase is transit fees on gas headed for the EU in return.

Gazprom made an insulting offer in this regard. Ukraine responded with an outlandish counter. The parties then stopped talks just as Vlad the Impaler sniffed for the umpteenth time that his feelings got hurt when the Ukrainians supplied arms to the Georgians during last summer’s dance party in Tbilisi.

Who knows what happened over the holidays but just after new year a shady court ruling in Kiev voided the pricing agreement and hours later the Impaler ordered Gazprom to cut supplies to Europe through Ukraine by an amount it accused Ukraine of siphoning off for internal use.

“Ukraine had neither the need nor the intention to steal Russian gas,” Hryhory Nemyria, Ukraine’s deputy prime minister told the Economist. And he added that Russia’s crass act in the dead of winter exposes it as an energy bully.

To which Gazprom’s Alexander Medvedev retorted that Ukraine “is responsible for everything that has happened.”

The squabble has hit Bulgaria, Hungary, Romania, Poland and Slovakia the hardest. It has impacted France, Germany and Italy as well.

Then over the weekend, Russia noticed its gas reservoirs were topped off meaning if it didn’t resume pumping soon, it would have to start burning gas.

Seeing the folly in that, the sides just agreed to get the gas flowing again and have neutral observers monitor the pipeline. There are also plans to have both boys stand in a corner for 5 minutes.


 

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