Investorideas.com – big ideas for global investors Search www.investorideas.com
   Member Access       Sign-up       Newsfeeds        Companies        Stock Directories       Research       Video       Funding   




Ukraine: The Real Energy Crisis Starts in June

By Robert Bensh, special to Oilprice.com

Ideas get bigger when you share them...

May 29, 2014 (www.investorideas.com newswire) 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.

Join Investor Ideas Members to access the Renewable Energy stocks directory, water stocks, biotech stocks, defense stocks directories and the Insiders Corner

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

More Info:

This news is published on the Investorideas.com Newswire and its syndicated partner network

Publish Your News - Send a release
News now!

Get free news alerts: Sign up here

Published at the Investorideas.com Newswire - Big ideas for Global Investors

Disclaimer/ Disclosure:The Investorideas.com newswire is a third party publisher of news and research as well as creates original content as a news source. Original content created by investorideas is protected by copyright laws other than syndication rights. Investorideas is a news source on Google news and Linkedintoday plus hundreds of syndication partners. Our site does not make recommendations for purchases or sale of stocks or products. Nothing on our sites should be construed as an offer or solicitation to buy or sell products or securities. All investment involves risk and possible loss of investment. This site is currently compensated by featured companies, news submissions, content marketing and online advertising. Contact each company directly for press release questions. Disclosure is posted on each release if required but otherwise the news was not compensated for and is published for the sole interest of our readers. More disclaimer info: http://www.investorideas.com/About/Disclaimer.asp

BC Residents and Investor Disclaimer : Effective September 15 2008 - all BC investors should review all OTC and Pink sheet listed companies for adherence in new disclosure filings and filing appropriate documents with Sedar. Read for more info: http://www.bcsc.bc.ca/release.aspx?id=6894. Global investors must adhere to regulations of each country.



Free News Alerts
Email:  

Read more News





TOP

Investor Ideas © 2000 - 2014 InvestorIdeas.com®, ECON

Free Investor Stock Alerts
Sign up here

login | logout | about us | contact | disclaimer / disclosure |
advertise | company profile directory | partners / links |
job search | privacy policy | trade | services | sitemap |