Friday, January 06, 2006
Folks in Ukraine ain't happy
I have meetings until tonight, but want to point readers interested in Ukraine to this piece from this morning. I'll be back to discuss this tonight.
UPDATE (and restamped): OK, tonight is now. Powered by Dewars.
First, I'll pretty much stay away from the Russia-done-bad story. Yes, they harmed themselves with Europe. I think this is priced into the deal, as they got in return almost full control of Turkmen gas as I mentioned Wednesday. As well, doing the math with this deal, they reduced the amount of gas they send to Ukraine from 23 billion cubic meters to 15 bcm. The rest of the gas (and the subsidy) is Turkmen. Reading Tom Warner yesterday, that looks like a savings of $0.5 to $2 billion subsidy to Ukraine per year. The cost is shifted from Ukraine to Turkmenistan, so both Ukraine and Russia look good. A week of bad European press and a negative comment from the U.S. State Dept. might be worth it for a billion bucks a year.
("So what does Turkmenistan get?" I have no idea. Seriously. I've tried thinking about this for almost a week, and I just don't get it. If someone has an idea, you can tell me anytime.)
The Ukrainians were of course able to parlay their strategic position in the gas supply line to get a price for gas that is very good. (The Bulgarians seem to be taking a page from the Ukrainian playbook just now.) The impact on Ukrainian businesses and households is likely to be pretty mute -- residences will continue to pay subsidized prices and continue to be inefficient in the use of gas, while businesses will pay close to the price at which Ukraine gets its gas. But the Ukrainian opposition is, well, pissed.
UPDATE (and restamped): OK, tonight is now. Powered by Dewars.
First, I'll pretty much stay away from the Russia-done-bad story. Yes, they harmed themselves with Europe. I think this is priced into the deal, as they got in return almost full control of Turkmen gas as I mentioned Wednesday. As well, doing the math with this deal, they reduced the amount of gas they send to Ukraine from 23 billion cubic meters to 15 bcm. The rest of the gas (and the subsidy) is Turkmen. Reading Tom Warner yesterday, that looks like a savings of $0.5 to $2 billion subsidy to Ukraine per year. The cost is shifted from Ukraine to Turkmenistan, so both Ukraine and Russia look good. A week of bad European press and a negative comment from the U.S. State Dept. might be worth it for a billion bucks a year.
("So what does Turkmenistan get?" I have no idea. Seriously. I've tried thinking about this for almost a week, and I just don't get it. If someone has an idea, you can tell me anytime.)
The Ukrainians were of course able to parlay their strategic position in the gas supply line to get a price for gas that is very good. (The Bulgarians seem to be taking a page from the Ukrainian playbook just now.) The impact on Ukrainian businesses and households is likely to be pretty mute -- residences will continue to pay subsidized prices and continue to be inefficient in the use of gas, while businesses will pay close to the price at which Ukraine gets its gas. But the Ukrainian opposition is, well, pissed.
Former Ukrainian prime minister Yulia Timoshenko yesterday said she would challenge in court the deal which this week ended Ukraine's gas price dispute with Russia.Ms Timoshenko called for the deal to be annulled and for the officials who signed it to be punished, saying it had "put Ukraine into a situation of unstable gas prices".
My guess is that any deals left over from her time with Gazprom in the mid-90s were just undercut by this deal. And while Russia may have lost, Gazprom has gained some benefits. I wonder whether some day Putin leaves the Kremlin and goes to Gazprom's chairmanship instead.
Categories: economics, Ukraine
