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Russia Holds the Line

What the Russians are Saying

Written by Brian Hicks
Posted January 5, 2009

2009 did not bring Europe a resolution to the Russia-Ukraine gas price dispute. Russia refused Ukraine's offer of advance payment, calling recent pricing a "humanitarian gesture." Both countries have in turn claimed that gas will be delivered through Ukraine to EU countries as promised, but Russia is leveling charges that Ukraine is siphoning gas for itself as negotiations continue.

BusinessWeek.com's Steve LeVine points out that Russia is using some fuzzy math on its part, or at least conveniently marking to market:

"...When Gazprom is retorting that it in fact could charge Ukraine $418 per 1,000 cubic meters if it so wishes, that’s Russia’s estimate of the price of natural gas last May."

And shortfalls in natgas supply edging into double-digit percentages have been reported from Poland, Hungary, and other former Soviet bloc countries.

As it's impossible to separate this resource dispute from Russia and Ukraine's long historical relationship (going waaay back past the Soviet Union into Czarist and even tribal times), we should also look at the newer market-oriented language that Russian officials are using.

Russian state news agency RIA Novosti led with this statement today:

Gazprom will reduce its delivery of gas to Ukraine by 65.3 million cubic meters - the volume that has been stolen, the Russian energy giant's CEO said on Monday.

"Stolen" is a strong word. It's reminiscent of the language Saddam Hussein used when he accused Kuwait of slant-drilling for Iraqi oil in 1990.

And it's the jargon of petropolitics that is now reaching into natural gas in Europe.

It's not likely that the troika of Gazprom CEO Alexei Miller, Russian President Dmitri Medvedev and PM Vladimir Putin will push for invasion of Ukraine in any real sense. Rather, both countries are set to bring cases for arbitration in Sweden, a third country where many international commercial disputes are resolved.

The European Union would like to help broker a deal, but since the continental body has such a huge stake in energy security, they can hardly play King Solomon and settle this.

One thing's for sure... this uncertainty can't be allowed to roll over into another winter. But with that instability comes opportunity to profit.

My colleague Ian Cooper and his Pure Energy Trader service is moving in on the Ukraine-Russia dispute with well-timed trades on natural gas funds and companies.

To get the profit angle on international energy tension, check out Pure Energy Trader today.

Sam Hopkins 

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