This would be double plus ungood for Ukraine. Upset with the fact that the price of gas has risen, the Ukrainian parliament has sacked the cabinet. It's not clear if the decision is valid, as the constitutional changes agreed after Yushchenko's election have changed the Verkhovna Rada's power to dismiss a government.

Opposition leaders complained the price for gas was too high for its industries and will eventually pinch private consumers. They also said the deal gives Russia too much leverage over gas imports to Ukraine and endangers Kiev's energy security.

...Opposition lawmaker Nestor Shufrych, of the Social Democratic Party (United), acknowledged that the parliament's resolution had no legal power.

"Yes, we know that we cannot dissolve the Cabinet ... we are familiar with the Constitution," Shufrych told reporters.

"We deprived the Cabinet of the opportunity to make decisions," he said.

Yushchenko's press secretary calls the decision politically motivated and Yushchenko calls it unconstitutional, while Prime Minister(?) Yekhanurov says this will harm his ability to finish the contracts negotiated last week.


Meanhile, Daniel Gross notes a story that Turkmenistan may not have the ability to fulfill the contract it agreed with Russia and Ukraine. I don't think it's any accident that this comes out simultaneously to Yushchenko traveling to Kazakstan to seek more gas, and for transit of Turkmen gas to Ukraine (which would have to move in part through Kazak pipelines.) The Moscow Times suggests Kazakstan is part of the mix:

Before Monday, investors were scratching their heads over how the gas from Russia and Central Asia was mixed to give Ukraine an end price of $95 per 1,000 cubic meters.

But the leaked document explains much about the deal. The Gazprom source confirmed the details in the document.

According to the contract, Rosukrenergo is to buy 41 billion cubic meters from Turkmenistan and up to 15 bcm from Kazakhstan and Uzbekistan. Only 17 bcm is to be bought from Gazprom at $230 per 1,000 per cubic meters. In total, Rosukrenergo will have 73 bcm.

While Ukraine consumes about 80 bcm annually, the country produces 18 bcm to 20 bcm, so it needs to import only 60 bcm, ...

Under the current deal, Rosukrenergo will have 10 bcm to 15 bcm to play with, ...

The price in Europe is currently about $280 per 1,000 cm. That's pretty much what they can do with all the Russian gas purchased at $230. And the money is going to "unknown beneficiaries". Perhaps a few Russian or Ukrainian officials?

UPDATE (10:30pm): I finished reading Robert Mayer and think there are two things to be explained. First, as best I can tell the sacking of the cabinet is unconstitutional. The New York Times takes that view in tomorrow morning's paper. With the elections for the parliament (Verkhovna Rada) coming in March as agreed when Yushchenko came to power, there was negotiated a period of standstill (the infamous Law 4180 -- and see the very bottom of this document governing those changes). As we saw in 2004, predicting the behavior of the Constitutional Court is a tough slog. Meanwhile a new report suggests some parliamentarians want Yushchenko to take direct control of the government and dissolve the Rada. That might explain why some of his own party's members sat out the no-confidence vote on Yekhanurov.

Second, it's worth noting as I said before that the present deal upsets the pre-existing equilibrium of bribes and kickbacks. Rosukrenergo is a new player, and using it redistributes the rents involved in this deal. (This is also why, I think, the present deal is really only for six months, as Scott Clark reminds us.) Stefan Korshak notes the presence of Tymoshenko's hand, which sounds plausible. She likely had a stake in the status quo ante January 1.

Categories: economics, Ukraine