Russia Withholding Natural Gas Supplies to Europe: Bullying or Contesting Ukraine?
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Related subjects: Carbon Emissions, Diplomacy & Politics, Economy, Energy Supply, European Union, Fair Trade, J.E. Robertson, Sustainable Development, The Russian Federation Comments Off
Russia is again withholding much needed natural gas supplies to parts of Europe, as people face the biting winter cold which has become Russia’s weapon of choice for negotiating more expensive contracts with conveyor countries like Ukraine. Russia is again accusing Ukraine of stealing natural gas from pipelines that run to the European Union, because it says Ukraine will not agree to its new contract terms and therefore has no right to extract gas from the pipelines.
In its latest move, Russia has stopped the flow of all natural gas to Ukraine, in what appears to be another in a series of annual bids to force the European Union to pressure Ukraine to accept less favorable terms for its own use of natural gas. Russia has been hard hit by the global economic downturn and the fall in petroleum prices, and now seems to be seeking a massive price rise for natural gas, whether or not it is workable for any trading partners.
Gazprom, Russia’s natural gas monopoly, is demanding that Ukraine pay a sharply increased price of $418 per thousand cubic meters for its natural gas, a 133% increase over the current price of $179.50. Gazprom’s deputy chairman, Alexander Medvedev, has sought to reassure western states that his firm is a reliable partner in providing energy, but plans are underway across Europe to find alternate sources of energy, to reduce dependence on Russia’s aggressive gas giant.
While Russia is using payments and contract disputes to pressure Ukraine, the risk to human life is very seriously and very directly escalated by cutting off supplies of fuel to Europe. There is an official “cold weather warning” in Hungary, which indicates high risk of death for anyone without shelter, projecting low temperatures of -18ºC and average temperatures that will not rise above -10ºC on the day. Every winter, between 300 and 400 people are killed in Hungary due to exposure to the cold.
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On Thursday, a woman was found frozen to death in one of the most affluent areas of the historic center of Budapest. According to Hungarian radio, at least 10 people were found dead last night and 20,000 homes were left with no heat or hot water, putting many at risk of cold-related illnesses or even exposure to life-threatening cold. Such realities —along with the pressure it will exert on governments across the region— are clearly part of the calculus of Russia’s energy policy-makers, who control Gazprom’s international negotiations.
Gazprom says Ukraine owes over $2 billion and refuses to pay. Ukraine in fact paid outstanding bills, but Gazprom has assessed more than half a billion dollars in “fines” and appears determined to extract the funds from Ukraine one way or another. Russia is applying extreme pressure to Ukraine on a number of fronts: 1. accusing Ukraine of stealing; 2. denouncing Ukraine for not paying its bills; 3. assessing extortionate “fines” for alleged delinquency; 4. demanding a 133% increase in the price Ukraine pays; 5. reducing supplies to the EU, and blaming Ukraine; 6. cutting off all supplies to Ukraine in absence of an agreement to Gazprom’s price demand.
According to the New York Times:
Russia and Ukraine also traded accusations over who was responsible for the drop in natural gas supplies to other European nations. Europe gets one-quarter of its natural gas from Russia, and 80 percent of that travels across Ukraine’s pipelines.
On Thursday, Gazprom cut off all gas supplies to Ukraine, saying Ukrainian officials had failed to pay a $2.1 billion bill. Ukraine’s state gas company Naftogaz made an 11th-hour payment of $1.5 billion, but Gazprom says Ukraine still owes more than $600 million in fines. Ukraine disputes the fines.
Ukraine may be seeking to ally itself more closely with partners in the European Union, to call Gazprom’s bluff, so to speak. Russia needs the revenues it generates from its vast natural gas reserves, but Gazprom’s clients need it to use less heavy-handed tactics in pricing its product. If the market value of natural gas from Russia cannot be trusted and a steady supply cannot be relied upon, the European Union will look elsewhere for ways to meet its energy demands.
There are currently plans to explore the construction of the world’s most massive solar farm in Egypt and the eastern Sahara, a project which could, if technology keeps pace with demand, and state of the art technologies are deployed, provide for all of the European Union’s energy needs, within one to two decades. Such developments could radically realign the balance of power in the energy sector and box Russia out of the most lucrative markets, if its methods are seen to be unfair, or even dangerous to the populations currently depending on their product.
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