Wednesday, January 14, 2009
It'll be cold here all week. But I can't complain about the cold because in Eastern Europe it's much, much colder. -49C/-56F in Slovenia on Saturday colder. All of which is really annoying them with the Russians and Ukrainians fighting over gas.
Hungarian Prime Minister Ferenc Gyurcs�ny said this week it was unacceptable that �the bullets Ukraine and Russia shoot at each other hit Hungary.� Like other affected countries, it has set up gas-usage limits for consumers.VOA News is also reporting on Hungarian gas shortages.
Eastern Europe has not seen such rationing since communist times. In Hungary schools were closed down during the week. Officials say they will compensate by sending children to school on weekends.
The Hungarian Ministry of Agriculture has handed out a list of food companies producing essential goods such as meat, milk and bread, and asked the government to ensure uninterrupted gas supplies.
Hungary has capacity to sustain some two months of heating public institutions and houses, 90 percent of which use gas, but only if it abandons all economic activity.
The Ukrainians understand this. They are in a very good strategic position, holding most of the gas lines than run to the EU as well as to the Caucasus. So it is trying to leverage that to get a good deal on its gas from the Russian firm Gazprom. It appears that Tuesday morning the Russians began to ship gas but were blocked by the Ukrainian side, even with international monitors supposedly present. (The Ukrainians blame Gazprom, naturally.) But as Stratfor points out the Russians have built a good buffer. I have noted that the January calendar normally contains a Russian-Ukrainian gas spat. This time, however, Stratfor thinks the Russians brought better weaponry to the fight.
...before 2004, the Russian-Ukrainian natural gas spat was simply part of business as usual. But now, Russia feels that its life is on the line, and that it has the financial room to maneuver to push hard � and so, the annual ritual of natural gas renegotiations has become a key Russian tool in bringing Kiev to heel.See also this analysis by Der Speigel, which finds that the EU was nevertheless caught flatfooted by this. My wager is that the Europeans are faced with enough trouble to help Ukraine solve this problem. The difference last we looked was about $49 per unit for the gas ($201 vs $250 per cubic meter.) When it only takes money to solve a problem, someone's money solves the problem. Whose, is the question. Russia's got a cash reserve, but the weather favors the Ukrainians.
And a powerful tool it is. Fully two-thirds of Ukraine�s natural gas demand is sourced from Russia, and the income from Russian natural gas transiting to Europe forms the backbone of the Ukrainian budget. Ukraine is a bit of an economic basket case in the best of times, but the global recession has essentially shut down the country�s steel industry, Ukraine�s largest sector. Russian allies in Ukraine, which for the time being include Yushchenko�s one-time Orange ally Yulia Timoshenko, have done a thorough job of ensuring that the blame for the mass power cuts falls to Yushchenko. Facing enervated income, an economy in the doldrums and a hostile Russia, along with all blame being directed at him, Yushchenko�s days appear to be numbered. The most recent poll taken to gauge public sentiment ahead of presidential elections, which are anticipated later this year, put Yushchenko�s support level below the survey�s margin of error. (h/t: Eclectecon by email.)