Like what you've read?

On Line Opinion is the only Australian site where you get all sides of the story. We don't
charge, but we need your support. Here�s how you can help.

  • Advertise

    We have a monthly audience of 70,000 and advertising packages from $200 a month.

  • Volunteer

    We always need commissioning editors and sub-editors.

  • Contribute

    Got something to say? Submit an essay.


 The National Forum   Donate   Your Account   On Line Opinion   Forum   Blogs   Polling   About   
On Line Opinion logo ON LINE OPINION - Australia's e-journal of social and political debate

Subscribe!
Subscribe





On Line Opinion is a not-for-profit publication and relies on the generosity of its sponsors, editors and contributors. If you would like to help, contact us.
___________

Syndicate
RSS/XML


RSS 2.0

Ukraine: The real energy crisis starts in June

By Robert Bensh - posted Monday, 2 June 2014


Kiev is feeling emboldened by the successful election of a new Ukrainian president and a bloody surge against separatists in the east, but in just a few days, Russia says it will twist the gas spigot, and there's very little Kiev can do to stop that.

On June 3, Russia plans to reduce the gas supply to Ukraine - and hence, to Europe - if Kiev has failed to pay in advance for next month's gas deliveries, the price for which has been doubled as a result of the political crisis.

Interim Ukrainian Prime Minister Arseniy Yatsenyuk is trying to play hardball with Moscow, suggesting that gas talks cannot move forward until Russia addresses the issue of $1 billion in gas it stole when it annexed Crimea.

Advertisement

Yatsenyuk may be riding high on the sense of stability the recent presidential election has brought, not to mention the unleashing of the Ukrainian military on pro-Russian separatists in Donetsk, but the "stolen gas" gambit is a losing one-a bunch of bluster that certainly won't make Moscow go away.

Ukraine owes $500 million just for May gas deliveries, on top of a whopping $3.5 billion in outstanding gas debt (according to Moscow). If at least part of this debt is not paid, there won't be any negotiating over price. Gazprom says Ukraine had agreed to pay $2 billion of its debt this week, but Kiev is instead talking about stolen Crimea gas.

What is promising in all of this is the election of Petro Poroshenko as Ukraine's new president, by a wide margin and with more than 60 percent voter turnout. Ukraine has new, legitimate leadership that Russia, the United States and the European Union have all agreed to recognize.

The new president immediately pledged to deal with the separatists in Donetsk and Lugansk, establish a working relationship with Russia and hold early parliamentary elections, which undoubtedly is an attempt to capitalize on the current political good will and further weaken a parliament dominated by former Regions politicians, Fatherland and business interests.

What the presidential elections give Kiev is a bit more strength and a more united force to deal with its energy crisis, as well as with Moscow.

In the coming days, Russia will recognise Poroshenko's legitimacy and remind him that June 3 is right around the corner. By next week, we could see the disruption of gas supplies to Europe, Russia's largest and most profitable market.

Advertisement

If this happens, an acute energy crisis in Ukraine is all but certain. Ukraine stockpiles its gas supply for the winter heating months during the summer. With current low supplies and higher prices expected for this summer, Russia will walk all over Kiev.

Short of handing Gazprom a cashier's check, there is no way to avoid the present crisis.

In the medium-to-long term, however, some hard decisions are going to have to be made-decisions that former Ukrainain vice prime minister and energy minister Yuri Boyko would have liked to make some time ago. These include selling off the state-run gas companies, Ukrnafta and Ukrgasproduction.

So we find ourselves reliving 2006 and 2009, when Russia cut off gas supplies to Ukraine and Europe. And if Ukraine hopes to stop reliving these desperate years over and over again, it's going to have to start selling off assets and rolling out the transparency.

The trick will be for Poroshenko and a newly appointed energy minister to work with both Russia and Europe to secure new pricing and to foster energy independence while at the same time being mindful of one very important fact: Ukraine's westward drift toward the EU is what led Russia to annex Crimea in the first place.

Russia will continue to use Russian nationalist movements in eastern Ukraine to stir discontent and to sow chaos, striving to keep Kiev off balance as Moscow works to use gas as a weapon to ensure a compliant Europe. It's a hard balance to maintain, especially as some Central European countries are seeing the light at the end of the independence tunnel.

Poroshenko is a highly pragmatic businessman, which is what Ukraine needs. But neither he nor those around him know energy, or Russia. From the energy crisis standpoint, it is the appointment of a new energy minister that will change the real balance of power.

There are very few figures in Ukraine who know the West, Russia and enough about energy to do what needs to be done. Because of that, Poroshenko's pick for energy minister should be the smartest choice, not the most popular one.

  1. Pages:
  2. 1
  3. 2
  4. All

This article was first published on OilPrice.com.



Discuss in our Forums

See what other readers are saying about this article!

Click here to read & post comments.

1 post so far.

Share this:
reddit this reddit thisbookmark with del.icio.us Del.icio.usdigg thisseed newsvineSeed NewsvineStumbleUpon StumbleUponsubmit to propellerkwoff it

About the Author

Robert Bensh writes for OilPrice.com.

Other articles by this Author

All articles by Robert Bensh

Creative Commons LicenseThis work is licensed under a Creative Commons License.

Article Tools
Comment 1 comment
Print Printable version
Subscribe Subscribe
Email Email a friend
Advertisement

About Us Search Discuss Feedback Legals Privacy