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January 2, 2006
More Russian Hot Air Over Ukrainian Gas

The Russo-Ukrainian gas crisis that threatens to engulf Europe escalated this morning as Gazprom's customers noticed a significant drop in deliveries. That prompted Russia to accuse Ukraine of diverting the flow of Russia's production -- which comes as no surprise, since the gas transits across Ukrainian pipelines and Ukrainian territory:

Russia's state-controlled natural gas monopoly on Monday accused Ukraine of diverting about $25 million worth of Russian gas intended for other European countries, a day after Moscow halted deliveries to Kiev in a price dispute.

Ukraine in turn accused Russia of trying to undermine its economy, calling for a resumption of gas price negotiations, this time including international experts.

Russia's OAO Gazprom halted gas deliveries to Ukraine on Sunday after Kiev balked at paying quadruple the amount it previously paid for Russian gas, which accounts for about a third of the consumption in the country of 48 million people.

Ukraine denies siphoning off any gas from Gazprom. They claim that they have switched to using strategic stores of their own natural gas and imports from the Bizarro land of Turkmenistan, where they recently reconfirmed pricing with Sapurmurat Niyazov, the narcissistic Stalinist that runs Turkmenistan as a personality cult. In truth, Ukraine will not long allow the transit of gas production across its country unless Russia gives them deep discounts on imports. The Ukrainians will eventually disrupt the deliveries by openly dismantling the pipeline in the final instance and evicting the Russians from their Black Sea naval bases.

The Russians, already cash-strapped as they are, cannot afford to allow this to continue for a long period. European nations will start making other arrangements for natural gas if the situation does not stabilize in the next few days; they cannot afford to have people freezing in their homes just to wait out the crisis. Yuschenko appears ready to play this game of chicken to the bitter, freezing end, and Putin had better decide whether his pocketbook can take the strain, as well as the loss of economic prestige just as he takes over the presidency of the G-8.

One wonders whether his new Gazprom director, Gerhard Schroeder, was supposed to smooth this path from the beginning. We have yet to hear from the former German Chancellor about the crisis.

Sphere It Digg! View blog reactions
Posted by Ed Morrissey at January 2, 2006 8:48 AM

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