Posted on 01/10/2006 4:40:47 PM PST by Tailgunner Joe
ON NEW YEAR'S DAY, as Russian President Vladimir Putin was assuming the chairmanship of the Group of Eight industrialized nations, he mocked the free-market creed of that exclusive club by cutting off the flow of Russian natural gas to Ukraine. That transparent attempt to influence Ukrainian politics reflected the Kremlin's statist control of Russia's lucrative energy sector...
If there was any lingering doubt about Putin's command of Russia's state-controlled energy conglomerates, it was erased by the ostentatious role he played during the showdown with Ukraine. Officials of the energy giant Gazprom were seen live on state-run TV making reports directly to Putin. It was he who gave them their marching orders for negotiations with Ukraine over the price and the transit fees for Gazprom's natural gas.
Even after European leaders had voiced their anxieties about the Kremlin's political manipulation of energy policies, Putin was proud of his role as the true CEO of Gazprom. He plainly sought to impress on the Russian public that he was dictating Gazprom's energy and pipeline decisions not in accordance with free-market principles but for the political purpose of punishing Ukrainian politicians who want to take their country out of the Russian orbit and into Europe's.
A particularly nasty sidelight to Putin's manipulation of energy assets for the purpose of enhancing the Kremlin's influence abroad concerns Germany's recently replaced chancellor Gerhard Schroeder. Schroeder was instrumental in negotiating a deal with Putin for a natural gas pipeline that will bypass Ukraine and Poland, running below the Baltic Sea and terminating in Germany. As an apparent reward from Putin, Schroeder has been made chairman of the consortium building the $4.8 billion pipeline.
(Excerpt) Read more at boston.com ...
Prices set by the government have nothing to do with the free market.
"have no love for Putin but I thought he raised the gas price to the market price "
Ukraine as a sovereign govt had valid contracts for $50 gas from Russia and Turkmenistan. There is no dispute here and Putins decision to shut the valve was purely political as Russia purchased and still purchases gas at these levels too.
"Prices set by the government have nothing to do with the free market."
It sounds like you are talkjing about the way Gazprom became government owned (which was dirty) or that you oppose the governmnet being in business in competition with private enterprise (as I do too, usually)
I was referring to this specific paragraph:
""ON NEW YEAR'S DAY, as Russian President Vladimir Putin was assuming the chairmanship of the Group of Eight industrialized nations, he mocked the free-market creed of that exclusive club by cutting off the flow of Russian natural gas to Ukraine.""
My understanding when I posted was that he did not cut off supplies - but instead raised prices and that Russia had been selling natural gas to Ukraine at below market prices, below the prices western Europe pays, for example.
I'm not sure that the price that a state owned monopoly charges internally needs to be the same price it charges foreign countries. When I posted that I was unaware of the contract situation and I'm still not sure I understand it.
So far I've found:
The EU foreign minister says the Ukraine is required to deliver the gas untouched to other countries under the EU charter.
The Ukraine says that they are entitled to a share of any gas that passes through their country,.
The BBC says that the contacts expired Dec 31, 2005 and that Russia offered to several incentives to get Ukraine to sign a new contract at closer to market rate.
The price ukriane is refusing to pay Russia is $140 per 1000 cubic feet. The average price that Russia charges europe is $240. This is apparently still less than marktet price in europe.
http://en.rian.ru/world/20060101/42819331.html\
http://www.bloomberg.com/apps/news?pid=10000085&refer=europe&sid=aOEOC7LFhL7o
http://news.bbc.co.uk/2/hi/europe/4574630.stm
I have to say I don't understand the BBC's summary - it sounds like this Swiss company is going to take a tremendous loss but that its half owned by Gazprom.
How was the dispute settled? Under the deal, Ukraine will buy gas from a Swiss-registered company half-owned by Gazprom, called Rosukrenergo. Rosukrenergo will buy gas from Gazprom at $230 per 1,000 cubic metres, and from Turkmenistan for much less. It will supply gas from both sources to Ukraine, and Ukraine will pay an average of $95 per 1,000 cubic metres.
The deal is very byzantine and is lining somebodies pockets - and it appears to be several Moscow oligarchs.
But Ukraine had two contracts with Gazprom and seperately with Turkmenistan - they extended thru 2009 and despite this, Putin shut the line down - strictly political and nothing to do with markets.
The outrage is that Putin himself set up the $50 price just last year thinking that it would insure the election of his lackey - it did not and that is why Putin is not to be trusted.
http://news.findlaw.com/ap/i/629/12-31-2005/328d002b834d892a.html
Thanks for that link - I understand better now.
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