HILVERSUM, Holland -- The Russian Prime Minister Vladimir Putin has severely criticised Ukraine's position in the conflict over gas between the two countries.
Putin says, Ukraine is holding European consumers hostage by refusing to allow gas through and is abusing its position as transit country. Putin has called on the EU to take steps against Ukraine.Kiev has in turn blamed Moscow for the lack of gas getting to eastern Europe.It says Russia is supplying the gas via the wrong pipelines, making it impossible for Ukraine to transport.The European Commission meanwhile has had enough of the gas row between the two countries.President of the EC Jose Manuel Barroso is advising companies affected by the conflict to take legal action.
Showing posts with label Gazprom Cuts Ukraine Gas Deliveries. Show all posts
Showing posts with label Gazprom Cuts Ukraine Gas Deliveries. Show all posts
Wednesday, 14 January 2009
Tuesday, 13 January 2009
Analysis: Ukraine Needs Long-Term, Oil-Linked Gas Contract With Russia
LONDON, England -- Europe faces potential gas supply crises every winter unless Russia and Ukraine agree a long-term oil-linked gas contract that might require financial help from Europe, analysts said on Monday.
Russia has not offered Ukraine the kind of long-term deal enjoyed by its customers in western Europe which might settle the row for good.Analysts said to do so would remove Moscow's favoured method of exerting politcal pressure on the pro-western government in Kiev."There has to date been little incentive to come to an amicable long-term relationship with Ukraine, so this is going to happen again and again. It suits Russia to return repeatedly to this gas relationship because it's a way of further destabilising the existing regime," Professor of Energy Policy at the University of Oxford Dieter Helm said."The Russians are holding them on a short-term exposure to the spot market and that's why we have this annual event," Helm added. "What is needed is a stable long-term pricing formula. That has to be pricing gas in relation to oil prices, which have fallen sharply."Over a week after Moscow cut off Ukraine in its annual row over how much Kiev pays for its gas, the two sides have agreed an international monitoring deal that should see Russian supplies to Europe recover in a few days.They have not agreed on how much economically-crippled Ukraine will pay for its gas this year, with Russia insisting Kiev should now pay "market prices" after decades of cheap supplies.Ukraine's main objection to Russian gas export monopoly Gazprom's price demands is that western European buyers should see their bills halve by summer as a slump in oil prices since July feeds into oil-linked gas contracts.Many analysts expect oil prices to remain low this year and possibly beyond as recession weighs on global demand.This could give Ukrainian more time to recover from its worst recession in over a decade and give it a better chance of paying bills next winter.But neither side of the bitter gas row has said publicly that a long-term deal is under discussion, posing the real threat of another crisis next year."They may well fudge a deal again this year, like they have done for the last three or four years, but then the same problem will crop up again next year until there is probably some help," David Cox, chief consultant at Poyry Energy Consulting in London, said."It is in Western Europe's interest that the Ukraine does start to pay market prices and the sooner the better. But in terms of making them move to fully market related prices they can't really do that in one step, or even in a couple of years -- it needs to be phased," he said.EUROPE ROLE"If we want the Ukraine in the EU and we want them on our side, rather than Putin's side, maybe we have got to pay a cost for that and that is partly helping them with the transition," Cox said.Helm warned against Europe subsidising anybody's energy bills but said the European Central Bank could give additional funds to Ukraine, in addition to the $16 billion from the IMF, to help Ukraine get through its economic crisis."There is a good solidarity reason for the EU as a whole being in a position to help out particular countries," he said."So we might consider help for the Ukraine through its current financial difficulties. But it should not be tied to the gas."Russia's price demands for this year have varied from $250 to $450 per 1,000 cubic metres of gas, with Moscow raising the price each time Kiev rejected its previous offer.Analysts estimate the latest Russian offer of $450 per 1,000 cubic metres is much higher than other European countries will be paying for their Russian gas over the next few months.They say Ukraine should not be expected to pay the same price as buyers in Germany or Austria because Russia uses Ukraine to ship 80 percent of the gas that it supplies to Europe."The Russians are trying to raise the prices to the same level at which they sell to western Europe. That's always been their intention, Niall Trimble, director of the Energy Contract Company in London said."Obviously Ukraine does not have the wealth these countries have, so it's very hard to do that." But some kind of oil-linked formula should ensure reliable winter warmth across Europe for years to come."That's what the rest of Eastern Europe's contracts are linked to as well, its not just Western Europe," Noel Tomnay, principal global gas research for Wood Mackenzie said."There are reasonable arguments being made here and its really up to the sides to conclude them."
Russia has not offered Ukraine the kind of long-term deal enjoyed by its customers in western Europe which might settle the row for good.Analysts said to do so would remove Moscow's favoured method of exerting politcal pressure on the pro-western government in Kiev."There has to date been little incentive to come to an amicable long-term relationship with Ukraine, so this is going to happen again and again. It suits Russia to return repeatedly to this gas relationship because it's a way of further destabilising the existing regime," Professor of Energy Policy at the University of Oxford Dieter Helm said."The Russians are holding them on a short-term exposure to the spot market and that's why we have this annual event," Helm added. "What is needed is a stable long-term pricing formula. That has to be pricing gas in relation to oil prices, which have fallen sharply."Over a week after Moscow cut off Ukraine in its annual row over how much Kiev pays for its gas, the two sides have agreed an international monitoring deal that should see Russian supplies to Europe recover in a few days.They have not agreed on how much economically-crippled Ukraine will pay for its gas this year, with Russia insisting Kiev should now pay "market prices" after decades of cheap supplies.Ukraine's main objection to Russian gas export monopoly Gazprom's price demands is that western European buyers should see their bills halve by summer as a slump in oil prices since July feeds into oil-linked gas contracts.Many analysts expect oil prices to remain low this year and possibly beyond as recession weighs on global demand.This could give Ukrainian more time to recover from its worst recession in over a decade and give it a better chance of paying bills next winter.But neither side of the bitter gas row has said publicly that a long-term deal is under discussion, posing the real threat of another crisis next year."They may well fudge a deal again this year, like they have done for the last three or four years, but then the same problem will crop up again next year until there is probably some help," David Cox, chief consultant at Poyry Energy Consulting in London, said."It is in Western Europe's interest that the Ukraine does start to pay market prices and the sooner the better. But in terms of making them move to fully market related prices they can't really do that in one step, or even in a couple of years -- it needs to be phased," he said.EUROPE ROLE"If we want the Ukraine in the EU and we want them on our side, rather than Putin's side, maybe we have got to pay a cost for that and that is partly helping them with the transition," Cox said.Helm warned against Europe subsidising anybody's energy bills but said the European Central Bank could give additional funds to Ukraine, in addition to the $16 billion from the IMF, to help Ukraine get through its economic crisis."There is a good solidarity reason for the EU as a whole being in a position to help out particular countries," he said."So we might consider help for the Ukraine through its current financial difficulties. But it should not be tied to the gas."Russia's price demands for this year have varied from $250 to $450 per 1,000 cubic metres of gas, with Moscow raising the price each time Kiev rejected its previous offer.Analysts estimate the latest Russian offer of $450 per 1,000 cubic metres is much higher than other European countries will be paying for their Russian gas over the next few months.They say Ukraine should not be expected to pay the same price as buyers in Germany or Austria because Russia uses Ukraine to ship 80 percent of the gas that it supplies to Europe."The Russians are trying to raise the prices to the same level at which they sell to western Europe. That's always been their intention, Niall Trimble, director of the Energy Contract Company in London said."Obviously Ukraine does not have the wealth these countries have, so it's very hard to do that." But some kind of oil-linked formula should ensure reliable winter warmth across Europe for years to come."That's what the rest of Eastern Europe's contracts are linked to as well, its not just Western Europe," Noel Tomnay, principal global gas research for Wood Mackenzie said."There are reasonable arguments being made here and its really up to the sides to conclude them."
Thursday, 8 January 2009
Wednesday, 7 January 2009
Bulgaria shivers as gas dwindles
Millions of Bulgarians now live in colder homes because the shutdown of Russian gas supplies has hit the country's centralised municipal heating.
In communist times Bulgarians could always rely on gas from their giant Soviet neighbour. They cannot recall a time like this, when such a vital energy source was missing.
Adding to the misery, temperatures have plunged well below zero.
The gas shortage means colder radiators, because there is less power to heat water to the correct temperature.
"I feel almost desperate," says Virginia Boiadzhieva, mother of a three-year-old boy in the capital Sofia.
"The central heating is the only way we could warm our apartment - the centrally delivered hot water is the only option for us.
"If the heating goes we could use a fan heater - although it would be more expensive. But if the hot water stops we'll have to stay with my husband's parents. They have an electrically-powered boiler, but we don't."
Prime Minister Sergei Stanishev admits Bulgaria is facing a serious energy crisis, as it depends almost entirely on Russian gas.
The first to feel the impact were factories and municipal heating centres, which now have to switch to using diesel. But that takes about three days - so customers in the cities are feeling the chill.
Seventy-two schools in Bulgaria, reliant on gas-powered heating, were closed on Wednesday.
Energy Minister Petar Dimitrov has warned that the power system may not be able to cope with the extra demand for electricity.
Meanwhile the Mayor of Sofia, Boiko Borisov, has urged people to save electricity. "It's not about a lack of electricity, but if we start heating with it, Sofia's energy system will not be able to bear such a surge and the whole system will collapse," he warned.
At an emergency meeting on Tuesday Mr Borisov ordered a temporary switch-off of the decorative lighting on some of Sofia's buildings.
Bulgaria has some gas reserves, but they are not enough to keep the economy and ordinary life running smoothly for a long time.
Some of the biggest factories - like the brewery in Plovdiv and four bakeries in Varna - have had to close due to the lack of gas.
Bulgaria's plants are collectively losing at least 500m lev (£234m; $344m) daily because of the gas cut, according to Evgeni Ivanov, head of the Bulgarian Confederation of Employers and Industrialists.
Nuclear option?
Some elderly Bulgarians have turned off their heating altogether because they cannot afford to pay for it.
"Cold. Switch on the nuclear plant!" says the city newspaper headlines.
One such is 73-year-old Snehza, who said: "I've been living in a cold apartment for three years - I don't see any difference now.
"I don't have central heating. I just put on as many clothes as possible and when it gets extremely cold I switch on an electric heater for a while."
On Tuesday President Georgi Parvanov suggested restarting the third reactor at the Kozloduy nuclear power plant, to help Bulgaria deal with the crisis.
But that - even if it were allowed by the EU - would take at least a month to put into effect. Bulgaria had to close two reactors on safety grounds, as part of its EU accession conditions.
Energy minister Dimitrov told Darik Radio that Bulgaria was still exporting electricity, so the country "couldn't say that it's in such a critical situation that it had to restart the reactors".
Service sectors hit by the gas shortage include taxi drivers, who say they might stop work as many of their cars run on methane, which is not available now.
Bakers have warned that within days the bread price could rise by at least 5% because they use gas-powered ovens.
Minister Dimitrov says the crisis is huge but "should be resolved within days". Many people enduring freezing cold in unheated homes may not share his optimism, however.
In communist times Bulgarians could always rely on gas from their giant Soviet neighbour. They cannot recall a time like this, when such a vital energy source was missing.
Adding to the misery, temperatures have plunged well below zero.
The gas shortage means colder radiators, because there is less power to heat water to the correct temperature.
"I feel almost desperate," says Virginia Boiadzhieva, mother of a three-year-old boy in the capital Sofia.
"The central heating is the only way we could warm our apartment - the centrally delivered hot water is the only option for us.
"If the heating goes we could use a fan heater - although it would be more expensive. But if the hot water stops we'll have to stay with my husband's parents. They have an electrically-powered boiler, but we don't."
Prime Minister Sergei Stanishev admits Bulgaria is facing a serious energy crisis, as it depends almost entirely on Russian gas.
The first to feel the impact were factories and municipal heating centres, which now have to switch to using diesel. But that takes about three days - so customers in the cities are feeling the chill.
Seventy-two schools in Bulgaria, reliant on gas-powered heating, were closed on Wednesday.
Energy Minister Petar Dimitrov has warned that the power system may not be able to cope with the extra demand for electricity.
Meanwhile the Mayor of Sofia, Boiko Borisov, has urged people to save electricity. "It's not about a lack of electricity, but if we start heating with it, Sofia's energy system will not be able to bear such a surge and the whole system will collapse," he warned.
At an emergency meeting on Tuesday Mr Borisov ordered a temporary switch-off of the decorative lighting on some of Sofia's buildings.
Bulgaria has some gas reserves, but they are not enough to keep the economy and ordinary life running smoothly for a long time.
Some of the biggest factories - like the brewery in Plovdiv and four bakeries in Varna - have had to close due to the lack of gas.
Bulgaria's plants are collectively losing at least 500m lev (£234m; $344m) daily because of the gas cut, according to Evgeni Ivanov, head of the Bulgarian Confederation of Employers and Industrialists.
Nuclear option?
Some elderly Bulgarians have turned off their heating altogether because they cannot afford to pay for it.
"Cold. Switch on the nuclear plant!" says the city newspaper headlines.
One such is 73-year-old Snehza, who said: "I've been living in a cold apartment for three years - I don't see any difference now.
"I don't have central heating. I just put on as many clothes as possible and when it gets extremely cold I switch on an electric heater for a while."
On Tuesday President Georgi Parvanov suggested restarting the third reactor at the Kozloduy nuclear power plant, to help Bulgaria deal with the crisis.
But that - even if it were allowed by the EU - would take at least a month to put into effect. Bulgaria had to close two reactors on safety grounds, as part of its EU accession conditions.
Energy minister Dimitrov told Darik Radio that Bulgaria was still exporting electricity, so the country "couldn't say that it's in such a critical situation that it had to restart the reactors".
Service sectors hit by the gas shortage include taxi drivers, who say they might stop work as many of their cars run on methane, which is not available now.
Bakers have warned that within days the bread price could rise by at least 5% because they use gas-powered ovens.
Minister Dimitrov says the crisis is huge but "should be resolved within days". Many people enduring freezing cold in unheated homes may not share his optimism, however.
Saturday, 3 January 2009
Gazprom Cuts Ukraine Gas Deliveries
MOSCOW, Russia -- Gazprom, the natural gas monopoly, began cutting supplies to Ukraine Thursday after negotiations over prices between Russia and Ukraine unraveled, state radio reported.
If the interruption continues, customers in Western Europe would likely experience shortages, since the same pipelines in Ukraine that are used for internal distribution are also used for export.That is a problem that has bedeviled Europe’s energy supplies from Russia for years. About 80 percent of Russia’s gas exports to Europe go through Ukraine.The transit of Russian natural gas across former Soviet states to customers in Western Europe is a pivotal economic and security interest of the Russian government: taxes on exports of oil and natural gas account for about 60 percent of its budget.Customers include major European utilities like E.ON of Germany and Eni of Italy.How quickly Western Europe would feel any shortage of natural gas was unclear, and it would depend on the scale and duration of any Russian energy embargo on Ukraine. The fuel is used for heating and to generate electricity, and winter is the period of peak demand.In comments broadcast Wednesday evening on Russian state television, Russia’s prime minister, Vladimir V. Putin, said that any interference with Russia’s gas exports to Europe would carry “serious consequences for the transit country itself.” He did not elaborate.Underlying the gas dispute are long-running tensions between Russia and Ukraine, a former Soviet republic. In 2004, after the street protests known as the Orange Revolution installed a pro-Western government in Ukraine, talks over gas supply and its transit became strained.In 2006, Russia halted supplies to Ukraine for three days, in an ostensible dispute over pricing and transit fees. A drop in pressure in the integrated European pipeline system led to shortages as far away as Italy, as Ukraine withdrew gas from its export shipments to meet internal demand.This year, Ukrainian authorities say they have sufficient reserves of gas to meet internal demand for three months.Moscow’s renewed pressure on Ukraine comes after Russia’s war in August with Georgia, another former Soviet republic, and the Kremlin’s subsequent claim to a renewed sphere of influence in the region. Like Georgia, Ukraine has angered Russia by seeking NATO membership.Ukraine said it paid $1.5 billion on Tuesday to RosUkrEnergo, the Swiss-based gas trader Gazprom uses to supply Ukraine. President Viktor A. Yushchenko issued a statement saying that Ukraine had settled for all deliveries in 2008. Gazprom maintains that Ukraine must also pay $600 million in late fees.By Wednesday evening, the sides had not settled on the price for 2009 deliveries or the tariff that Ukraine would charge for shipping Russian natural gas to customers in Western Europe.However, Ukraine made a late appeal for a return to negotiations, The Associated Press reported. Bohdan I. Sokolovsky, Mr. Yushchenko’s energy adviser, said a note was delivered to a Russian diplomat in Kiev asking Russia not to turn off the gas and expressing hope that an agreement could be reached in the coming days, The A.P. said.Mr. Putin said that Gazprom is asking Ukraine to pay $250 per 1,000 cubic meters in 2009, up from $179 for the same volume in 2008. He characterized the 2009 fee as a subsidized rate.Mr. Sokolovsky said Ukraine would not accept that price unless Russia offset the increase by paying Ukraine more to export gas to Europe.Source: The New York Times
If the interruption continues, customers in Western Europe would likely experience shortages, since the same pipelines in Ukraine that are used for internal distribution are also used for export.That is a problem that has bedeviled Europe’s energy supplies from Russia for years. About 80 percent of Russia’s gas exports to Europe go through Ukraine.The transit of Russian natural gas across former Soviet states to customers in Western Europe is a pivotal economic and security interest of the Russian government: taxes on exports of oil and natural gas account for about 60 percent of its budget.Customers include major European utilities like E.ON of Germany and Eni of Italy.How quickly Western Europe would feel any shortage of natural gas was unclear, and it would depend on the scale and duration of any Russian energy embargo on Ukraine. The fuel is used for heating and to generate electricity, and winter is the period of peak demand.In comments broadcast Wednesday evening on Russian state television, Russia’s prime minister, Vladimir V. Putin, said that any interference with Russia’s gas exports to Europe would carry “serious consequences for the transit country itself.” He did not elaborate.Underlying the gas dispute are long-running tensions between Russia and Ukraine, a former Soviet republic. In 2004, after the street protests known as the Orange Revolution installed a pro-Western government in Ukraine, talks over gas supply and its transit became strained.In 2006, Russia halted supplies to Ukraine for three days, in an ostensible dispute over pricing and transit fees. A drop in pressure in the integrated European pipeline system led to shortages as far away as Italy, as Ukraine withdrew gas from its export shipments to meet internal demand.This year, Ukrainian authorities say they have sufficient reserves of gas to meet internal demand for three months.Moscow’s renewed pressure on Ukraine comes after Russia’s war in August with Georgia, another former Soviet republic, and the Kremlin’s subsequent claim to a renewed sphere of influence in the region. Like Georgia, Ukraine has angered Russia by seeking NATO membership.Ukraine said it paid $1.5 billion on Tuesday to RosUkrEnergo, the Swiss-based gas trader Gazprom uses to supply Ukraine. President Viktor A. Yushchenko issued a statement saying that Ukraine had settled for all deliveries in 2008. Gazprom maintains that Ukraine must also pay $600 million in late fees.By Wednesday evening, the sides had not settled on the price for 2009 deliveries or the tariff that Ukraine would charge for shipping Russian natural gas to customers in Western Europe.However, Ukraine made a late appeal for a return to negotiations, The Associated Press reported. Bohdan I. Sokolovsky, Mr. Yushchenko’s energy adviser, said a note was delivered to a Russian diplomat in Kiev asking Russia not to turn off the gas and expressing hope that an agreement could be reached in the coming days, The A.P. said.Mr. Putin said that Gazprom is asking Ukraine to pay $250 per 1,000 cubic meters in 2009, up from $179 for the same volume in 2008. He characterized the 2009 fee as a subsidized rate.Mr. Sokolovsky said Ukraine would not accept that price unless Russia offset the increase by paying Ukraine more to export gas to Europe.Source: The New York Times
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