Russia and Oil

[Annie]

Somehow I put a very dumb title on this thread:

http://www.usmessageboard.com/forums/showthread.php?t=28047

which caused a bunch of posts that had nothing to do with the salient issue. I'm not going to repost the related posts, as they can be found at the previous thread-including the awful Schroeder connection.

Now Russia seems to be turning off the spigot, since Ukraine wouldn't give in. Europe too is not going to get the oil they need:

http://news.yahoo.com/s/ap/20060101/ap_on_re_eu/russia_ukraine_gas

Russia Halts Natural Gas Sales to Ukraine

By JIM HEINTZ, Associated Press Writer2 hours, 26 minutes ago

Russia's natural gas monopoly halted sales to Ukraine in a price dispute Sunday and began reducing pressure in transmission lines that also carry substantial supplies to western Europe.

Ukraine's natural gas company Naftogaz acknowledged the reduction by Russia's Gazprom.

"Gas is not flowing at all through some transit routes, which can lead to a fall in pressure in all the pipelines and limit the overall supply of gas to Ukraine and Europe," said Naftogaz spokesman Eduard Zaniuk.

However, he said, "for the people and municipal services there will be enough gas."

Gazprom had given Ukraine a deadline of midnight Saturday to agree to pay 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.

The showdown has underlined the tensions between the two former Soviet republics since Ukrainian President Viktor Yushchenko — a West-leaning leader who wants to reduce Moscow's clout in his country — defeated a Russian-backed rival in a bitter electoral battle a year ago.

The gas crisis comes as Ukraine prepares for parliamentary elections in March, in which Yushchenko's bloc faces a strong challenge from the party of Viktor Yanukovych, who lost the presidential ballot after mass street protests forced a revote.

The Russian Foreign Ministry said Sunday that Ukrainian authorities "consciously decided to ruin the talks process with the Russian side and to use the gas problem almost to create the image of an enemy with the goal of manipulating the internal political situation."

On Saturday, Russian President Vladimir Putin said Ukraine could continue paying the old price of $50 per 1,000 cubic meters for the first quarter of 2006, but only if Ukraine agreed by the end of the day to start paying the new price of $230 in the second quarter.

Gazprom spokesman Sergei Kuprianov said Ukraine refused the offer, but Naftogaz denied that claim Sunday.

In a statement posted on its Web site, Naftogaz said it sent a "draft agreement that envisioned a transfer to market prices after the first quarter of 2006" to Russia before midnight Saturday.

Gazprom has said the price increase is necessary to conform to world gas price levels.

Ukraine has not objected to a market price but wants the increase to be phased in. Yushchenko said late Friday that the most his country could pay now is $80 per 1,000 cubic meters.

Gazprom had said its sales cutoff to Ukraine would begin at 10 a.m. However, even before then, Kuprianov said pressure in the pipelines was being reduced.

Gazprom provides about half the natural gas used in the European Union, and about 80 percent of that is sent in pipelines that cross Ukraine.

The dispute with Ukraine has raised wide concerns that EU supplies could be affected. But Kuprianov offered assurances on Russian television that "export gas for Europe is moving at full volume."

Supply problems for Europe could undermine Western trust in Russia's natural gas industry, one of the keystones of the country's economy, and tarnish the Russian stint as chairman of the Group of Eight industrial nations, which started Sunday.

A Foreign Ministry statement Sunday said Russia would "strictly fulfill" its supply commitments to Europe. It said the "responsibility for any possible ... problems for European countries caused by the actions of Kiev will lie with Ukraine."

EU spokeswoman Mireille Thom said energy experts would meet Wednesday to look at the situation and discuss how European countries should react.

"We hope the two parties will find an agreement quite soon," she said.

EU Energy Commissioner Andris Piebalgs said last week that Europe could cope with a temporary interruption to its gas supply.

Burkhard Bergmann, the head of Germany's E.On Ruhrgas gas distributor, said Sunday that Russia's move could eventually crimp supplies for industrial customers, but homeowners should not worry.

Ukraine's government has said its transit arrangements allow it to siphon off up to 15 percent of gas moving through the country. Russia says that would be outright theft.

Ukrainian officials also say the country has sufficient gas reserves to weather a Gazprom cutoff for at least several weeks but decline to specify how much is in reserve.

Kuprianov predicted Ukraine would suffer quick and severe effects.

The refusal "to meet our proposals for resolving the problems will have catastrophic consequences for the economy of Ukraine and, unfortunately, for the brotherly Ukrainian people," he said.