Starting early this morning, Ukraine’s Naftogaz natural gas importer was put on a prepayment scheme by Russian export giant OAO Gazprom for failing to repay $1.9 billion in debt. State-run Naftogaz refused the prepayment plan, and didn’t order any gas, so Ukraine’s shipments halted.
The European Union had been brokering talks between Ukrainian and Russian officials trying to bridge the gap on the issue, which centers around pricing. Gazprom initially wanted to charge $485 per 1,000 cubic meters, the same as it charges to other European nations, while Ukraine sought a price of $268.
Russian President Vladimir Putin proposed $385 as a good middle ground, and the EU was trying to get both sides to agree to something between $300 and $385, but Ukraine refused, and talks broke down last night.
Ukraine Energy Minister Yury Prodan shrugged off questions about the shutoff, insisting Ukraine was fully prepared to manage without any imports of natural gas from Russia, which provides the majority of the nation’s energy.
The other significant problem is that Gazprom’s shipments to the EU go through Ukraine as well, and Gazprom has warned the European Commission of possible disruptions in the event Ukraine tries to siphon gas out of the pipelines.
Ironically, Gazprom was in the process of building an alternative pipeline through the Black Sea into Romania to allow them to bypass Ukraine, but the EU had forced Romania to temporarily block it over bidding questions. Romanian officials had suggested the halt was precipitated by the EU trying to force Gazprom to negotiate with Ukraine.
Gas companies eventually cut off individual customers' gas to their homes after around three months of non-payment for the supplies; so, why not the same with nations? Ukraine is well over $1 billion in arrears to Gazprom for its gas supplies; and now, Russia's largest gas company has done the same to Ukraine as it would to individual customers; it shut off the supplies.
To prevent such shutoffs, nations – as well as individual customers – are obligated by contract to pay for their gas supplies; those that fail to do so are in breach of contract, and have their gas shut off after the time period specified in the contract(s). Ukraine violated the contract it had with Gazprom; thus, it must suffer the consequences, until payments are resumed.
I have had a few friend that seemed to dislike me after they owed me money .I started to notice they took longer vacations and bought newer cars . Not paying for fuel , food or housing allows more money for new cloths and a lot of other things
Why should Europe be so concerned that Russia sends gas to Europe . They either need to buy the fuel or they don't .Why are they trying to stop the Russian pipe lines . Even the United States is trying to build alternative pipe lines to supply Europe . Sounds like they don't want Russia to make money
That's right. They don't.
Sounds like they take their marching orders directly from Washington, even if it means harming their own countries (i.e. treason).
It should be obvious to everyone that Washington is providing all of the mischief. South Stream (which would make Ukraine's position as a supplier moot) was put on hold because John McCain went to Bulgaria and threatened them with sanctions.
They (EU/UK politicians) want whatever their master (the US) tells them they want.
Couple of problems with the article. I believe the pipeline that Gazprom was to build was through Bulgaria not Romania. The project, South Stream, was suspended in Bulgaria due to pressure from European Commission and US. McCain himself came to Bulgaria to personally deliver the message. This blockage of South Stream will not last, as all countries that are participating need gas. The insistence of EU Commission that ownership of pipeline and the gas must be separated is meant to deprive countries that allow pipeline to go through from having any say over getting the gas for their needs. This was the stumbling stone in Turkey's negotiations for the now defunct Nabucco project. If a country that allows pipeline has only the earnings of transit, and cannot negotiate for the amounts of guaranteed gas — that will take away every tool these countries have in getting lower cost and guaranteed quantities. Also, these are poorer European countries, and there is no interest in Europe in developing them. By denying them the right to get guaranteed quantities of gas, only to get the benefits from the pipeline itself, countries may end up with pipeline but no gas for its needs. South Stream guarantees gas, and the market price mechanism is decided. EU proposal is discriminatory as it prevents European countries to have say in contracts for their own benefit.
Example of Ukraine is where there is no international agreement like South Stream, so the politicians in Kijev can endlessly cause crisis and effectively blackmail everyone — both the supplier of gas, and the customers in Europe. This is why it is unwise for EU Commission to go against its own members and force them into bad deal in order to allow Brisel to have a control over who gets gas, and who does not.
Ukraine is a chokepoint on gas flow between Russia and the EU. Ukraine is bankrupt and under the thumb of the IMF. The US likes it that way as a means over control, keeping the EU subjugated and controlling some of Russia's income.
At last – Action by the Russians !
Where would World Trade go if Countries REFUSE to pay for items they import JUST BECAUSE THE PRICE IS NOT TO THEIR LIKING?
The US, EU, and UKRAINE have the arragonce to demand Russia keeps supplying them with FREE GAS whilst imposing SANCTIONS which seek to wreck the Russian economy.
Russia should have turned off the gas a long time ago.
I guess that's the final confirmation that Russia is no longer communist. By shutting off service to a customer, Russia is now a full-fledged capitalist nation. For the few who still had any doubts about that, there you go.
I know most educated people know Russia hasn't been communist for over a decade. But you see enough yahoos on the internet saying stupid things that its worth pointing out. Of course, these are usually the same idiots who refer to Obama and even Wall Street itself as socialists.
Ukraine will have a difficult time prosecuting their war against their own people without a reliable source of energy. The whole conflict is absurd. Poreshenko appears to be coming to his senses as he has reversed his position and has proposed peace talks with the breakaway provinces in the East. This is one war the U.S. has ignited that may get settled.
This is all political. Ukrainian PM "Yats" and their new oligarch gangster President are playing with the well-being of Ukrainian citizens this winter. For what reason? Who knows, hatred of Russia? What's for certain is that the banker's main goal is to break European dependence on Russia for gas and replace it over time with supplies from the U.S. – hence, the current explosion in fracking going on all over the country. Russia would be economically weakened by such a development, which is what they want. And they don't care how many Ukrainians will have to suffer as a result of such actions.
Ukraine hopes that EEC or IMF will pay their gaz bills.In the contract with Russia they had a special clause granting them a reduction of price in exchange of amicable coperation with Russia.The new Kiev team don't like Russia.It's their right.But don't ask smiles of Russia in return.They could have a neutral position and work with Russia and Europ.After the maydan coup,Yatseniuk was shouting that he will put Nato bases in Crimea instead of Russians ones .And what happend ? He supressed the status of the russian language,cut russian tv on the territory and what happened in Donetsk?Lugansk ? Today Poroshenko stopped military cooperation with Russia.What would happend whith the workers of these factories? They will try to find chinese clients ? Ukrainians mothers do not want to have their children killed (by the way on both sides). For solving conflicts it is time that the new ukrainian governement realize that problems are not regenerated by bad russian but mainly by the wrong decisions they take.The same should happen in the minds of Obama and some European leaders.
I would guess that Ukraine hopes to get the EU to pay its gas bill, which it may well do in practice. I could well see a deal whereby gas is pumped through to the EU but the Ukrainians are unofficially allowed to siphon off a part of it, which they will do anyway. The other aspect of this is that Putin has thrown away the only weapon he had in regard to the EU. The Member States hesitated to impose sanctions for fear that Putin would retaliate by cutting off gas supplies, thereby allowing him to drive a wedge between the EU and the US. He has now cut off supplies anyway. so there is no further reason for the EU to hold back on sanctions. Putin has really painted himself into a corner! Whichever way he goes, he shoots himself in the foot.
You are wrong: a lot more Russian gas goes through Belarus and North Stream bypassing Ukraine, then went through Ukraine, so Putin still has the lever he needs.
It is only natural that any seller stops supplying goods to a non-paying customer. It is truly amazing how long it took Russia to do that.