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Monday, May 26, 2014

Update On The Russian-Chinese Natural Gas Pipeline; The Ukraine "Crisis"

Isn't this interesting? Ukraine, which we were all told was broke (financially), has found a way to make up all the back-payments it owes for Russian natural gas. AP is reporting:
A proposed solution to a dispute over Ukrainian natural gas debts to Moscow would see Ukraine's gas company pay $2 billion to Russia's Gazprom this week and trigger talks on the price Kiev should pay for future deliveries as it tries to avert a supply cutoff ...
...  "we are not done" but said he is optimistic of an agreement.
The proposal calls for Ukraine's Naftogaz to make an initial $2 billion payment to Gazprom on Thursday to settle part of Kiev's outstanding bills for gas delivered between November and March.
One wonders where the $2 billion came from for past payments plus the payments that will be needed going forward? I am aware of only two countries that could come up with that kind of cash for this kind of deal ... and would be willing to pay. The total bill currently owed by the Ukraine is $3.5 billion. The bigger question is the price they will pay for Russian natural gas going forward.

The Ukraine is still important to Russia. I can't remember if I linked the WSJ op-ed, but even with the Chinese-Russian natural gas pipeline that would not be adequate for Russia's balance of payments. Russian still needs income from gas it sells to the Ukraine/EU and the pipeline isn't going to be on-line for a couple of years.

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