Monday, January 02, 2006

A New Kind Of "Cold" War

This is pretty fasincating stuff: wait until the dead of the winter heating season in what's predicted to be the worst winter in Europe in a decade and then stop providing gas to an unruly child, with the collateral damage of hurting the organization that had such trouble with you all those years ago, the EU:
Europe suffers gas import cuts after Russia move

By Meg Clothier

MOSCOW (Reuters) - European countries were enduring reduced gas supplies at the height of winter on Monday after Russia halted its deliveries to Ukraine, stirring fears about the use of energy as a political weapon.

Russia, taking over the G8 chairmanship for the first time this month and aiming to promote itself as a reliable energy source, cut its neighbor's gas supplies on Sunday after Kiev refused Moscow's demand for a fourfold price rise.

Moscow said it had no choice but to act after Kiev refused to sign a new contract that would have ended the preferential price treatment of the Soviet era.

Washington stepped into the row, the State Department saying it regretted Russia's move.

"Such an abrupt step creates insecurity in the energy sector in the region and raises serious questions about the use of energy to exert political pressure," State Department spokesman Sean McCormack said in a statement.
Ya mean like war for oil, Mr. McCormack?

But here's the interesting stuff in this story:
The Russian state monopoly, Gazprom, said enough gas was still being piped via Ukraine to meet its commitments to other countries, and if they were not getting all their gas, Ukraine must be diverting it.

The Austrian oil and gas group OMV said Russian gas supplies had dropped overnight and were now down by about one third, but that it could use reserves to cover the loss.

Hungary's gas wholesaler MOL said its Russian deliveries via Ukraine had fallen by more than 40 percent. It had already told big consumers to switch to oil where possible and said it would cut deliveries to Serbia and Bosnia by more than 40 percent. Poland said its supplies were down by 14 percent.

Germany's largest gas supplier, E.ON-Ruhrgas, warned there could be problems for big wholesale customers if the dispute dragged on.


Western-leaning Ukrainian President Viktor Yushchenko is trying to take his state into the EU and NATO. This annoys Moscow, which does not like the idea that its influence over the former Soviet Union might be waning.
So what will the EU do? Will they fight for the Ukraine or abandon its bid for entry into both the EU and NATO?

What this story missed (I'm not speculating as to why) is the Ukraine counterclaim that Russia is stealing gas from Turkmenistan, which has about as much validity as the Russia claim about the Ukraine siphoning gas off the pipeline to Europe illegally.

The Ukraine's main energy source is natural gas (understandable, as it has nearby sources in former allies Russia and Turkmenistan, which has so far refused to make up the shortfall, probably as a nod to Russia).

Keep in mind that Russia only turned down the tap and hasn't turned it off. Russia holds about 25 percent of Europe's natural gas supplies. Should this situation worsen, watch out for YOUR energy bills here at home. As it is, you're likely to see prices jump a bit uncomfortably.

I always figured that drop is gas prices after the boost by Katrina, Rita and Wilma was a sop to the voters and shoppers. I think the bill may be coming due.