Russia’s gas formula for Ukraine: freeze but keep the profits

Putin with Miller, the head of Gazprom

Putin with Miller, the head of Gazprom 

2014/10/26 • Analysis & Opinion

Article by: Vitaliy Portnikov

The head of the European Union delegation in Kyiv, Jan Tombiński, has called the gas negotiations between Ukraine, Russia, and the European Union a “soap opera” that is about to come to an end. It is impossible not to agree with this figurative expression by an experienced diplomat. The negotiations are proceeding with such difficulty simply because the Russian government is pondering where to place the punctuation in the formula “cannot agree to freeze” and simply cannot decide.

On the one hand, the Kremlin has a political goal — to freeze Ukraine. Putin is placing great hopes in cold Ukrainian homes and the stoppage of Ukrainian industry. From the perspective of the Russian ruler, who traditionally is quite aware of Ukrainian problems, it is exactly this freezing that will bring about the “third Maidan” and the victory of pro-Russian forces in Kyiv, who will reject European integration and bring Ukraine into the Customs Union.

On the other hand, Gazprom cannot afford to refuse to supply gas to Europe, an (arrangement) that can be compromised by “freezing.” Additionally, Vladimir Putin also does not wish to lose the profits from the “energy wallet” made possible by the delivery of gas to Ukraine. We must not forget that for decades Ukraine has been one of Gazprom’s most important clients.

Of course, in Moscow Ukraine was loved not for that reason but because, with the help of Ukrainian gas recipients, it was possible to construct various corruption schemes that enriched Russian gas monopoly executives and their Kremlin “handlers.” Now, when the possibility of creating new corruption schemes has vanished, Russia is attempting at least to retain the profits — but in such a way that Ukraine still freezes.

It is precisely because it is not clear how to achieve both objectives immediately that Russia is experiencing such difficulty in reaching an agreement with Ukraine and the Europeans. In this sense, the process of gas negotiations does not differ at all from other wars of Vladimir Putin. He always tries to reach maximum goals with minimal losses, especially economic ones. And there is some logic in this: Russia is not so much a state as a business project for Putin and his closest entourage. And when they try to decide political issues with the help of the business project, he spins his wheels each time. If one were to translate Putin’s wishes into an exact formula, it would look like this: he wants to freeze Ukraine but have the Europeans pay Gazprom for the effort. So far he has not yet figured out how to do it. The “soap opera” continues.

Translated by: Anna Mostovych
Source: Radio Svoboda

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  • Rods

    We can see with the new Lithuanian LPG terminal, opening on the 27th October, that can supply 90% of the Baltic country’s needs, shows that Europe is not prepared to pay the total price of expensive gas + political coercion that Russia requires from Western European countries. Ukraine may freeze a bit this winter and their industry may suffer a bit, but by next winter they could be in a position of complete independence, through using the next year to set up and use LPG facilities in the port of Odessa, or alternatively use underutilised LPG terminals in other countries, by increasing domestic production, continue to use cheaper Norwegian gas, but most importantly, especially with prices rising until there are no subsidies by drastically improving energy efficiency through much more efficient gas appliances and domestic and industrial building’s insulation. At the moment Ukraine is the most inefficient user of gas in Europe.

    I’m sure a combination Ukrainian ingenuity, patriotism and hard work and if necessary a bit of hardship will see them through this winter. My wife’s family have been busy cutting wood, including in Thursday’s early snow and intend to use this all winter in their log burning stove, where they don’t want to use any of Putin’s gas. If the winter is unusually long and cold, they would rather slow down the wood consumption, by only heating one room and if further measures are required, they will have no heating and keep warm by strapping hot water bottles to their torsos. They’ve done it before when they have had heating problems and will do it again if necessary.

    Despite the current cold spell the local school have cold class rooms for the teachers and pupils this week, where to save gas they won’t put on the heating until November. The Ukrainian people are extremely patriotic and are all trying to do what they can to save on gas.

    • Frank Fileccia

      The heat came on this weekend because of sub zero temperatures

      • Don Casavant

        Yes Frank it did, and it is supposed to stay cold for the next week. The people in my apartment building got together and have planned to reduce the amount of gas we use by 25%. In our city there is no central heating plant, each apartment has their own heating system. We warm our apartments only when we first get up every morning (for about 15 minutes), then shut the heat off the remainder of the day. An extra shirt and hat during the day, extra hot tea and coffee and it is liveable! I do not know if we can do this when it is -20C but we are going to try! We plan to distribute small electric space heaters to the older people so when it gets very cold they can sit in their kitchens(small room) and fend off the bitter cold! We will not let PUTLIER dictate to our country what we should or should not do!

        • Frank Fileccia

          Electric heaters are a problem. I think the reason they turned on the heat here in ZP is because the electric grid was collapsing 4-5-6 times an evening because of all the electric heaters. And I had to have the electrical wiring repaired because it couldn’t handle more than one 2000W device at a time.

          But I agree with what you say. Putler and TerrorusSSia can go to hell

          • Don Casavant

            Last winter was the first time our city did not have the central heating system. We had a problem with the electricity because the feed lines to each apartment building could not handle the load and kept melting! So they change their system from one line feeding the entire building to one line for each “block” within the building. We have 5 “blocks” in our building, 20 apartments in each block. So now each line only services 20 apartments and that solved the problem. We have never had any problems with the grid. The sub-station is less than 3 kilometers from our city. If we need to use the space heaters to help the Babushkas there are only 5 of them in my block so I do not think it will be a problem.
            ZP=Zaporozhye? I live in Vilnohirsk. If so we are about 110 K apart!

    • Paul P. Valtos

      God bless the Ukrainian people. From an incompetent Czar, a Kerensky government, a Lenin dream of utopia for the Politburo, to another whackjob Stalin,to Yeltsin and now Putin, God should give Ukraine a break. It’s the old story, United we stand, divided we fall” Right off the coinage. Ukrainians have used wood for centuries and they can still use coal if they are determined enough. As a kid I shoveled coal into a hand fired steam furnace listening to the pipes pop as the steam rose to the second floor. Kind of a nice feeling as a kid. I think that sound was why I became an engineer.

      • Frank Fileccia

        all the coal is in Donbass unfortunately