The West's Ukraine illusion

International Herald Tribune ^ | FRIDAY, JANUARY 6, 2006 | Anatol Lieven

[jb6]

(Anatol Lieven is a senior research fellow at the New America Foundation in Washington.)

WASHINGTON With the Russian-Ukrainian gas dispute now settled, in a murky but apparently satisfactory fashion, it is time to reflect on what the affair says about the West's relations with Russia and, still more important, the West's relations with Ukraine.

The West's strategy toward Ukraine has been founded on an illusion: that Ukraine would leave Russia's orbit and "join the West," and that Russia would pay for this.

Consider the figures: Until the latest price hike, Russia was supplying Ukraine with a de facto annual energy subsidy estimated at somewhere between $3 billion and $5 billion a year. That is more than all EU aid in the 14 years since Ukrainian independence

[GarySpFc]

Okay, so everybody gets to up the charges. That's capitalism, and fine by me.

[Grzegorz 246]

Welcome to FR, Ivan.

[Grzegorz 246]

"Gas costs $240."

Where ? Gas prices strongly depend on costs of transport and these are a little lower in case of Ukraine than in case of W.Europe, don't you think ? Besides the point is not that Russia demanded "market prices", but how they did It.

[Mazepa]

That new gas deal ($95 for 1000 kbm) means that Ukraine lost about $2 bln.

That's wacky tobacky mathematics, gavriusha. Get your calculators ready.
Before:
Ukraine spent for 40 bill. c.m. of Turkmen gas at $95 per 1000 c.m.= $3.8 bill.
Ukraine spent for 18 bill. c.m of Russian gas at $50 per 1000 c.m= $0.9 bill.
Together, Ukraine spent $4.65 bill.
For transit of Russian gas of 120 bill. c.m, rate of $1.09 per 1000 c.m for 100km, and length of 1400km, Ukraine made= 120,000,000,000 c.m *(($1.09/1000 c.m.)/100 km)* 1400 km= $1.83 bill.
Net Ukrainian spending on gas= 3.8+0.9-1.83=$2.87 bill

Now
Ukraine buys all the gas, Russian and Turkmen, 58 bill. c.m at $95 per 1000 c.m.= 58,000,000,000*95/1000= $5.51 bill.
Ukraine makes for 120 bill. c.m. rate $1.6 per 1000 c.m. per 100 km, length 1400 km, calculation same as before= 120,000,000 *1.6 *1400/100= $2.69 bill
Net Ukraine spending on gas= 5.51-2.69= $2.82 bill
Ukraine is breaking even, more or less same as last year.

[GarySpFc]

Ukraine is breaking even, more or less same as last year.

EXACTLY!!! I am happy to hear a Ukranian confess it. The Russians originally offered gas at $160, plus they offered to up the transit fees to $1.60 to help offset the difference. Ukraine REFUSED, and DEMANDED $3.00. It was at that point the Russians upped the price to $230, and the Ukrainians uppped their DEMAND for trasit fees to a reported $5.00.

Yes, yes, that evil Putin was out to get the Ukraine.

[pepsionice]

Of all the former Soviet brothers...the Ukraine is likely to be the most corrupt. You can't do business in a city there unless you bribe someone. If you want a safe construction site...you bribe someone. If you want a license of some type...you bribe someone. Thats the entire scheme of the country. While everyone may be on some anti-corruption episode and think they actually voted in a clean-cut politican...it simply looks that way...his staff and buddies are all corrupt and he just slides along the top of their efforts.

[x5452]

And folks say Ukraine has nothing in common with Russia.

[Mazepa]

The length of Ukrainian pipe is about 1000 km

I tried to find the length on the net- couldn't. So I did it the old fashioned way with a ruler and a map to find distance between where Russian pipe enters (around Sumy) to where the pipe exits(Lvivska-Zakarpatska oblast in the west) ~1200-1250 km. Added 100km because the pipe is not the shortest distance between the points. Thus the 1400 km.

And transit fee for the latter in 2005 was $0.7 per 1000 cbm for 100 km

I thought it was $1.09, the same that Ukraine charged Russia. (For my price of Turkmen gas, I used $60+ $1.09*3000km. The reason I used $60 is because that's the price Turkmens were going to charge anyway, regardless of this recent Russian-Ukrainian deal. So the fundamental difference is that my calculations are comparison of what Ukraine would have paid in 2006 if the deal with Gasprom to buy at $50 remained intact, versus what Ukraine would pay under the new agreement. Actually we're both right- Ukraine's gas bill is going to be bigger compared to last year, BUT that's not the result of the new deal, but of the Turkmenbashi's gas rise from $45 to $60)

For how much Ukraine is going to make in 2006, the length of the transit is making a big difference. $2.69 bill if it's 1400 km long (as I say), $1.92 bill. if it's 1000km long (as you say).