Date: Sat, 20 Dec 2008
From: Sergei Roy <SergeiRoy@yandex.ru>
Subject: Russia, Ukraine mess over gas
Ukraine: Buy Now, Pay – When?
By Sergei Roy,
Editor, guardian-psj.ru
Russians who have the misfortune of sticking to the old, Soviet-era routine of spending their summer vacation on the Crimean Black Sea coast, bring back funny tales of the behavior of Ukrainian traffic cops: they see Russian license plates, they stop the car and demand payment just on principle, for nothing. If pressed, they come up with this rationale: you are Russians, you are rich, a few hrivnas are nothing to you, and they will go a long way with us.
This seems to be the current Ukrainian “national idea.” All the world lives on credit: Buy now, pay later. Ukrainians have improved on that slogan: Buy Russian gas now, don’t pay ever. Not, anyway, until your trading partner has exhausted the entire spectrum of appeals – to Brussels, to individual recipients of Russian gas in Europe, to Universal Conscience, or whatever.
As we all remember, at the beginning of 2006 no appeals of any sort helped, and Russia briefly cut off supplies to Ukraine entirely, causing shortfalls among some European consumers and a wave of Russophobia among those habitually addicted to the malaise. Only boring, grumpy business people mumbled at the time that debts must be paid and debtors must pay up or go to the wall. For what is known as the “international community” at large, Russia was the bad guy, now and forever.
Now, two years on, the situation is worse than before. Ukraine has not paid its old debt, only about a third of it, and Ukraine’s president promises about $200 million “soon” and not a penny more. Gazprom says, Pay up the full amount (some $2.4 billion) or there will be no new contract for the coming year; no contract, no gas supplies, as simple as that.
Russia also warned Brussels of the coming crisis through an early warning mechanism set up after the 2006 imbroglio, so if Europeans choose to complain about any shortfalls to come, they know who they will have to talk to, and it’s not Russia. Ukraine is just a transit country, and the amount of gas on its eastern border must equal the same on the western one.
Now, what are the possible scenarios as of this moment? Like I said, the situation is more critical than in 2006 – for obvious reasons. Either due to the global crisis or, as Ukraine’s Premier Timoshenko insists, due to President Yushchenko, in cahoots with the Central Bank chairman, playing dirty tricks with Ukrainian finances, hrivna has lost half its value against the dollar since the start of the global turndown. Ukraine thus does not have enough hrivnas to buy enough dollars to pay its debt to Gazprom.
This is point one. Point two is even more serious: if Ukraine has no funds to pay its old debt, what is it going to use for money to pay for gas in the coming year, especially considering that its price will rise more than twofold, from $179 to $400 per thousand cubic meters? Answer: steal the gas it needs to survive and for some to thrive, what else. Just like it has been doing all these years since independence – stealing gas and making billions for the “gas princess” Timoshenko and other members of the Ukrainian “elite.”
Then a further question suggests itself: Will Russia and its European partners stand for it?
Well, the Europeans may – and I’m sure they will – pretend that it’s a matter between Russia and Ukraine only, like they did in the past. It’s a very comfortable position: on the economic side, Russia is expected to supply gas as per contract, and we don’t care how you do it; on the political side, Russia can be accused of using its energy supplies as an instrument of political pressure, of neo-imperialism, etc. etc. Very comfortable indeed.
So it all comes to this one point: Russia’s readiness or otherwise to stand firm and demand her pound of flesh. For it is her own, that pound: the money is being taken away from the Russians who are losing jobs like folks the world over, more of them with every passing day, and they need the same things as those other folks: funds for people on the dole, public works, retraining programs, bailout programs for ailing companies – everyone knows the litany by now.
There is one more reason for Russia to stand firm, which Gazprom need not mention – because everyone in Russia is aware of it. There is a guy called Konovalyuk, of Ukrainian parliament, who heads a parliamentary commission of inquiry into the conduct of Ukraine’s president, its defense minister, and similar characters before and during Georgia’s aggression against South Ossetia. Some of the facts they have brought to light positively stink of aiding and abetting the aggressor. There’s the sale, for peanuts, of Ukrainian military hardware, including the most advanced types, to Saakashvili not only in preparation for the assault on Tskhinval but right during the hostilities. More than that, Konovalyuk says he has lists of Ukrainian servicemen who fought against Russia during the conflict itself, and quite a few other, extremely interesting documents.
In this context, supplying free gas to Ukraine would be too much like offering the left cheek after one has been smitten on the right. Highly moral, of course, but hardly the proper basis for sound business practice.