Wednesday, March 05, 2008

The Long Gas-Chain.

The Russian state-owned energy firm Gazprom has cut its supplies of gas to Ukraine by a half. This has caused alarm in the European Union since much of its provision of gas from Russia is actually piped through Ukraine. The problem is an ongoing issue of $1.5 billion (£750 million) which Gazprom claim they are owed by Ukraine for gas supplies from last year. I don't understand this but it appears that Ukraine are adamant that they have paid-up and yet Gazprom believe they are still owed the sum.

What worries the EU is that the Ukranian state gas company, Naftogaz, has stated that it reserves its right to take appropriate action, and it might think it appropriate to disrupt supplies of gas into Europe, particularly if Gazprom accedes to its threat to cut supplies of gas to Ukraine by a further 25% (leaving them with just one quarter of normal supply). However, in consequence of current warm weather and enough reserves of gas, Naftogaz issued a statement that there is no intention to cut European gas supplies as yet.

A spokeman from Gazprom has reassured Europe that supplies of gas will continue as normal: "Export deliveries via Ukranian territory are carried out in full volume," said Sergei Kupriyanov. A spokeman from the UK's National Grid has confirmed that the UK does not rely on pipelines through Ukraine to provide its gas-supplies, since we do not get any of our gas directly from Russia. That's interesting to know. The spider's web of gas-pipelines is accessible via the link below, showing how gas comes from Russia via Ukraine into eastern Europe and then on into Germany and other EU countries. This is potentially a tremendously powerful hand to play.

Relations between Russia and Ukraine appear difficult and there was a previous cut of gas-supplies from the former to the latter in 2006, which did affect exports into Europe and strained relations between Moscow and Brussels. The relationship between Britain and Russia also appears a little fraught, partly over the murder of Alexander Litvinenko, who had written a number of defamatory articles regarding the Russian leadership, and in November 1998, he publically accused his superiors of ordering the killing of the Russian billionaire, Boris Berezovsky.

In a bizarre case, Litvinenko was poisoned in London with the radioisotope polonium-210. Britain issued an extradition request for its prime suspect, the businessman Andrei Lugovoi, in Moscow, but Russia refused to hand him over. Britain then expelled four Russian diplomats from London, leading Moscow to expel British diplomats and promise to review future visa requests for British officials. There is also an issue over an art exhibition due in the UK next month, but Russia has now decided not to bring it over to the Royal Academy of Arts, also in London.

On the positive side, there is apparently an early warning system whereby Europe is told beforehand when a fall in supply from Russia is expected. My feeling is that political muscles are being flexed, demonstrating the incontrovertible truth that whoever controls the gas or oil controls the world.

Related Reading.
[1] "Art row sours UK - Russian relations":
[2] "Russia deepens Ukraine gas cuts".

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