Russia and Ukraine Natural Gas Price War

Keith Kohl

Written By Keith Kohl

Posted July 1, 2015

Ukraine imports of natural gas come from just two sources: Russia, and the European Union.

For years, the country has enjoyed a large discount from Russia… and that’s about to change.

Russia Natgas Pipes

In 2015, Russia is trying to decrease that discount by 60%, which as you can probably guess, doesn’t make the Ukraine very happy.

You see, not only did the Ukraine want to pay the lower price, but also asked Russia to sign a three-way international accord that would offer continuous trade at least until next winter.

Naturally, Russia refused, on both political grounds and economic grounds, and claimed the price was in line with what other countries are currently paying.

In other words, the market called for a price increase.

Although the Ukraine is still open to negotiation, Russia won’t budge. And this this disagreement comes with a deadline: Ukraine needs at least two months to replenish their underground natural gas stores before the cold season. At Russia’s current prices, it would cost the Ukraine $1.7 billion.

Until a compromise is made, Ukraine will continue to import gas from the EU and is looking for lenders to loan the $1 billion they need to afford their required storage needs.

To continue reading…

Click here to read the Bloomberg article.

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