Wednesday, December 24, 2008



clipped from:

Europe gets roughly a quarter of its natural gas supplies from Russia,

Gazprom announced that it would eventually increase prices from the already uncomfortable $420 per thousand cubic meters (tcm) to $720 per tcm.

a decrease in consumption led to the first drop in Russian exports to Europe in a decade — and forced Russia to reconsider its plan.

prices would remain low only for certain customers, meaning that Russia will trade better energy deals for what it wants politically.

Belarus, Ukraine, Slovakia, the Czech Republic and Hungary reportedly have told Gazprom that they could default on payments if they get charged higher prices.
Russia has responded to such defaults by cutting supplies.

January 2006 when Ukraine and Russia were embroiled in a natural gas dispute. Russia cut Ukraine’s portion of the supplies out of its deliveries, which traveled across Ukraine to much of Europe. Ukraine then began siphoning off the supplies heading to Europe, leaving quite a few countries on the tail end of the supplies out in the cold.

Kiev is looking to fill the gap by raising natural gas prices to domestic consumers by 35 percent could trigger a massive response

But Ukraine, Belarus, continually defaults has allowed Moscow to use energy as a major lever in negotiations on every front with Kiev and Minsk

Contracts between EU countries and Russia are supposed to be decided by the European Union as a whole, not by individual states. However, most of these countries are already financially strapped and are considering individually negotiating with Russia.

70 percent of Russia’s exports to Europe go through Slovakia’s system. For Slovakia to be able to handle higher payments to Russia, it can simply charge more for that energy transport.

Czech Republic began feeling Russia’s wrath in the form of decreased oil supplies on the day Prague finalized missile defense plan with the United States. Russia has one thing on its mind when it comes to the Czech Republic: preventing the American missile defense deal.

Hungary is in the most extreme position because it is flat broke. Hungary will most likely turn back to its European allies for either more aid or a solution to the crisis.

This could bring the European Union together in a common stance over its long-debated Russian energy dependence. But even a united front will not create supplies or alternatives, this coupled with Russia’s attempts to deal with each EU country individually, the new energy crisis could skewer the European Union

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Gazprom had warned Monday that its European customers could face a disruption of gas supply due if its dispute with Ukraine led the Kremlin to stop the supply of gas to the former Soviet satellite. Russia provides about a quarter of Europe's gas, and 80.0% of its exports transit through Ukraine.

The companies have until Jan. 1 to sign a new contract, and Russia is pushing for higher prices. Russia has warned that gas prices for Ukraine could rise to $400.00 per 1,000 cubic meters, from the current $179.50.

The Kremlin spent up to $2.5 billion supporting the ruble on Monday, according to, marking the sixth time it has had to do so in December alone.

Capital flight from Russia has meanwhile compelled the country's billionaire oligarchs to ask for loans from the government in exchange for portions of their assets (often companies).

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