Out Of Gas: Gazprom Cuts Off Ukraine, Will Turkey Be Next?
Last month in “Pipeline Politics: Russia, Turkey Clash Over Energy As Syria Rift Shifts Focus To German Line,” we revisited Russia’s recent deal with Shell, E.On and OMV to double the capacity of the Nord Stream pipeline, the shortest route from Russian gas fields to Europe.
The MOU, signed earlier this year, angered the likes of Ukraine and Slovakia. In short, the more gas that can transported via the Nord Stream, the less needs to go through Eastern Europe and that means less revenue for the countries through which the pipelines are built. “They are making idiots of us. You can’t talk for months about how to stabilize the situation and then take a decision that puts Ukraine and Slovakia into an unenviable situation,” Slovak PM Robert Fico exclaimed a few months back.
For those who may need a refresher, here, coutesy of Bloomberg, is a look at the routes by which Russian gas reaches end customers:
Obviously, the conflict in Ukraine has made for a rather awkward situation when it comes to Russian gas supplies. Long story short, Ukraine wants to cut its dependence on Russian gas and if everyone’s telling the truth, Gazprom would probably just as soon not deal with a country that, i) owes Moscow $3 billion on a defaulted bond, and ii) is effectively at war with Russia.
Nevertheless, a couple of months ago the two countries signed an deal ensuring supplies through Q1 of 2016 and guaranteeing Ukraine comparable prices to its neighbors. Well, that looks to have fallen apart, because on Wednesday, Gazprom decided to stop shipments to Ukraine citing a lack of prepayments. Optically, that looks bad for Kiev and so, in the energy equivalent of “you can’t fire me because I quit”, Ukraine announced today that it would stop buying Russian gas.
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