Best of the Week
Most Popular
1. The Trump Stock Market Trap May Be Triggered - Barry_M_Ferguson
2.Why are Central Banks Buying Gold and Dumping Dollars? - Richard_Mills
3.US China War - Thucydides Trap and gold - Richard_Mills
4.Gold Price Trend Forcast to End September 2019 - Nadeem_Walayat
5.Money Saving Kids Gardening Growing Giant Sunflowers Summer Fun - Anika_Walayat
6.US Dollar Breakdown Begins, Gold Price to Bolt Higher - Jim_Willie_CB
7.INTEL (INTC) Stock Investing to Profit From AI Machine Learning Boom - Nadeem_Walayat
8.Will Google AI Kill Us? Man vs Machine Intelligence - N_Walayat
9.US Prepares for Currency War with China - Richard_Mills
10.Gold Price Epochal Breakout Will Not Be Negated by a Correction - Clive Maund
Last 7 days
The Best “Pick-and-Shovel” Play for the Online Grocery Boom - 18th July 19
Is the Stock Market Rally Floating on Thin Air? - 18th July 19
Biotech Stocks With Near Term Catalysts - 18th July 19
SPX Consolidating, GBP and CAD Could be in Focus - 18th July 19
UK House Building and Population Growth Analysis - 17th July 19
Financial Crisis Stocks Bear Market Is Scary Close - 17th July 19
Want to See What's Next for the US Economy? Try This. - 17th July 19
What to do if You Blow the Trading Account - 17th July 19
Bitcoin Is Far Too Risky for Most Investors - 17th July 19
Core Inflation Rises but Fed Is Going to Cut Rates. Will Gold Gain? - 17th July 19
Boost your Trading Results - FREE eBook - 17th July 19
This Needs To Happen Before Silver Really Takes Off - 17th July 19
NASDAQ Should Reach 8031 Before Topping - 17th July 19
US Housing Market Real Terms BUY / SELL Indicator - 16th July 19
Could Trump Really Win the 2020 US Presidential Election? - 16th July 19
Gold Stocks Forming Bullish Consolidation - 16th July 19
Will Fed Easing Turn Out Like 1995 or 2007? - 16th July 19
Red Rock Entertainment Investments: Around the world in a day with Supreme Jets - 16th July 19
Silver Has Already Gone from Weak to Strong Hands - 15th July 19
Top Equity Mutual Funds That Offer Best Returns - 15th July 19
Gold’s Breakout And The US Dollar - 15th July 19
Financial Markets, Iran, U.S. Global Hegemony - 15th July 19
U.S Bond Yields Point to a 40% Rise in SPX - 15th July 19
Corporate Earnings may Surprise the Stock Market – Watch Out! - 15th July 19
Stock Market Interest Rate Cut Prevails - 15th July 19
Dow Stock Market Trend Forecast Current State July 2019 Video - 15th July 19
Why Summer is the Best Time to be in the Entertainment Industry - 15th July 19
Mid-August Is A Critical Turning Point For US Stocks - 14th July 19
Fed’s Recessionary Indicators and Gold - 14th July 19
The Problem with Keynesian Economics - 14th July 19
Stocks Market Investors Worried About the Fed? Don't Be -- Here's Why - 13th July 19
Could Gold Launch Into A Parabolic Upside Rally? - 13th July 19
Stock Market SPX and Dow in BREAKOUT but this is the worrying part - 13th July 19
Key Stage 2 SATS Tests Results Grades and Scores GDS, EXS, WTS Explained - 13th July 19
INTEL Stock Investing in Qubits and AI Neural Network Processors - Video - 12th July 19
Gold Price Selloff Risk High - 12th July 19
State of the US Economy as Laffer Gets Laughable - 12th July 19
Dow Stock Market Trend Forecast Current State - 12th July 19
Stock Market Major Index Top In 3 to 5 Weeks? - 11th July 19
Platinum Price vs Gold Price - 11th July 19
What This Centi-Billionaire Fashion Magnate Can Teach You About Investing - 11th July 19
Stock Market Fundamentals are Weakening: 3000 on SPX Means Nothing - 11th July 19
This Tobacco Stock Is a Big Winner from E-Cigarette Bans - 11th July 19
Investing in Life Extending Pharma Stocks - 11th July 19
How to Pay for It All: An Option the Presidential Candidates Missed - 11th July 19
Mining Stocks Flash Powerful Signal for Gold and Silver Markets - 11th July 19
5 Surefire Ways to Get More Viewers for Your Video Series - 11th July 19

Market Oracle FREE Newsletter

Top AI Stocks Investing to Profit from the Machine Intelligence Mega-trend

Ukraine: The Real Energy Crisis Starts in June

Commodities / Ukraine Civil War May 29, 2014 - 01:33 PM GMT

By: OilPrice_Com

Commodities Kiev is feeling emboldened by the successful election of a new Ukrainian president and a bloody surge against separatists in the east, but in just a few days, Russia says it will twist the gas spigot, and there's very little Kiev can do to stop that.

On June 3, Russia plans to reduce the gas supply to Ukraine — and hence, to Europe — if Kiev has failed to pay in advance for next month's gas deliveries, the price for which has been doubled as a result of the political crisis.


Interim Ukrainian Prime Minister Arseniy Yatsenyuk is trying to play hardball with Moscow, suggesting that gas talks cannot move forward until Russia addresses the issue of $1 billion in gas it stole when it annexed Crimea.

Yatsenyuk may be riding high on the sense of stability the recent presidential election has brought, not to mention the unleashing of the Ukrainian military on pro-Russian separatists in Donetsk, but the "stolen gas" gambit is a losing one—a bunch of bluster that certainly won't make Moscow go away.

Ukraine owes $500 million just for May gas deliveries, on top of a whopping $3.5 billion in outstanding gas debt (according to Moscow). If at least part of this debt is not paid, there won't be any negotiating over price. Gazprom says Ukraine had agreed to pay $2 billion of its debt this week, but Kiev is instead talking about stolen Crimea gas.

What is promising in all of this is the election of Petro Poroshenko as Ukraine's new president, by a wide margin and with more than 60 percent voter turnout. Ukraine has new, legitimate leadership that Russia, the United States and the European Union have all agreed to recognize.

The new president immediately pledged to deal with the separatists in Donetsk and Lugansk, establish a working relationship with Russia and hold early parliamentary elections, which undoubtedly is an attempt to capitalize on the current political good will and further weaken a parliament dominated by former Regions politicians, Fatherland and business interests.

What the presidential elections give Kiev is a bit more strength and a more united force to deal with its energy crisis, as well as with Moscow.

In the coming days, Russia will recognise Poroshenko's legitimacy and remind him that June 3 is right around the corner. By next week, we could see the disruption of gas supplies to Europe, Russia's largest and most profitable market.

If this happens, an acute energy crisis in Ukraine is all but certain. Ukraine stockpiles its gas supply for the winter heating months during the summer. With current low supplies and higher prices expected for this summer, Russia will walk all over Kiev.

Short of handing Gazprom a cashier's check, there is no way to avoid the present crisis.

In the medium-to-long term, however, some hard decisions are going to have to be made—decisions that former Ukrainain vice prime minister and energy minister Yuri Boyko would have liked to make some time ago. These include selling off the state-run gas companies, Ukrnafta and Ukrgasproduction.

So we find ourselves reliving 2006 and 2009, when Russia cut off gas supplies to Ukraine and Europe. And if Ukraine hopes to stop reliving these desperate years over and over again, it's going to have to start selling off assets and rolling out the transparency.

The trick will be for Poroshenko and a newly appointed energy minister to work with both Russia and Europe to secure new pricing and to foster energy independence while at the same time being mindful of one very important fact: Ukraine's westward drift toward the EU is what led Russia to annex Crimea in the first place.

Russia will continue to use Russian nationalist movements in eastern Ukraine to stir discontent and to sow chaos, striving to keep Kiev off balance as Moscow works to use gas as a weapon to ensure a compliant Europe. It's a hard balance to maintain, especially as some Central European countries are seeing the light at the end of the independence tunnel.

Poroshenko is a highly pragmatic businessman, which is what Ukraine needs. But neither he nor those around him know energy, or Russia. From the energy crisis standpoint, it is the appointment of a new energy minister that will change the real balance of power.

There are very few figures in Ukraine who know the West, Russia and enough about energy to do what needs to be done. Because of that, Poroshenko's pick for energy minister should be the smartest choice, not the most popular one.

Source: http://oilprice.com/Energy/Energy-General/Ukraine-The-Real-Energy-Crisis-Starts-in-June.html

Commentary by Robert Bensh, special to Oilprice.com

© 2014 Copyright OilPrice.com- All Rights Reserved
Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors.


© 2005-2019 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in

6 Critical Money Making Rules