Streetwise Professor

January 13, 2012

A Fool and His Pipeline are Soon Parted: Or, Will Ukraine Be Singing the Gazprom Song?

Filed under: Energy,Politics,Russia — The Professor @ 3:14 pm

It’s January, so that means that the Ukrainians are probably not singing the Gazprom Song right now.  Instead, they are engaged in their annual gas price battle with the Russian company.  Ukraine wants a lower price, but Gazprom says no.  OK, says Ukraine, if you won’t lower the price, we’ll take half the agreed to quantity.  No to that too, says Gazprom: you have a take or pay deal that obligates you to take at least 80 percent of 52 bcm.

The parties are due to meet for decisive negotiations on Sunday.  But one cannot rule out another gas war.

And Ukraine may in fact be singing the Gazprom Song after the negotiations are over.  Vladimir Socor claims that Ukraine’s president Yanukovich and his Party of Regions are preparing to cede control of Ukraine’s gas transmission network to Russia in exchange for a break on the gas price:

President Viktor Yanukovych and his government are setting the stage, politically and legislatively, for transferring Ukrainian pipelines to Russian control, in a package deal with Gazprom. The president and government wavered and agonized at times, but are now actively preparing Ukrainian public opinion for an imminent deal. In the endgame of negotiations, Ukraine’s governing Party of Regions is rushing legislation through parliament to authorize transfers of gas infrastructure. Leasing pipelines to Gazprom is one form of transfer, out of several under consideration.

Transferring ownership or control of assets in this way, in exchange for a pie crust promise on future gas prices, would be utterly foolish.  But don’t put it past the Ukrainians, whose government (to use the word quite loosely) is utterly dysfunctional.

Ukraine denies this:

Ukraine will not sell its gas pipeline network to Russia in exchange for supplies of cheaper gas, Ukrainian Energy Minister Yuri Boiko said on Friday, ruling out a solution long suggested by Moscow.

He pledged, however, to honour the existing deal, which Ukraine considers unfair, if talks on revising it fall through.

Ukraine, which depends heavily on Russian gas supplies, has sought for over a year to renegotiate a 2009 deal with Moscow, which it says sets an exorbitant price for the fuel. But talks have failed to produce any results so far.

“The issue of (a pipeline network) sale has never been on the agenda. We dismissed it immediately,” Boiko told reporters. “If we find a model that satisfies both sides, we will make a deal. Otherwise we will work under the existing contract.”

But as any investment banker can tell you, there are ways of structuring deals so that they are effectively sales even if they aren’t called such.  (Hence the Tymshenko’s government specifying of a large list of things the Ukrainian government wasn’t permitted to do with its pipes–the law that Yanukovich is trying to change, according to Socor.)

Besides, the relationship of the Ukrainian government to the truth is thoroughly Sovok (as a one time commenter was fond of pointing out), so Boiko’s protestations are hardly credible.

We’ll see what happens on Sunday, but it’s unlikely to be good–except, perhaps, for Putin, who has coveted Ukraine’s gas transport network forever.   The Ukrainians have done a masterful job of painting themselves into a corner.  Europe is distracted by its own issues, right now, but Yanukovich has completely alienated the EU regardless with his prosecution of Tymshenko.

So, the Ukrainians stand cold and friendless.  Perhaps they should start memorizing the words: “Let’s drink to you, let’s drink to us, let’s drink to Russian gas.”

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10 Comments »

  1. You are absolutely right, SP – never in the history of the world have so few idiots painted an entire country into such a pitiful corner.

    And – to paraphrase, “the idiots in Ukraine have never missed an opportunity to miss an opportunity.”

    Everyone in Ukraine now recognizes that the blithering idiot “the president” of Ukraine, Yanukovych, and his sovok mafia banda have pissed off Europe, pissed off Rasha – and gotten nothing for it, other than giving away Sevastopol to the Rashan Black Sea Fleet.

    Ah, but wait – there is the “Ukrainian third way.”

    Firtash, who was cut out as middleman through the RosUkrEnergo scheme, and his buddy, Boyko, the “Energy Minister,” have cooked up —– Ostchem.

    First, Firtash and Boyko cooked up one of the biggest frauds of all time in the Stockholm Arbitration Tribunal, when Firtash represented himself and Boyko, as “Energy Minister” of Ukraine, represented —– Firtash, to get Firtash his RosUkrEnergo gas back, to the tune of about $5 billion.

    Next, of course, Tymoshenko goes to jail.

    Next, the Yanusvoloch/Boyko/Firtash/zArazov gang have been trying to re-negotiate the Gazprom contract for over 1 year – something they claimed Tymoshenko should have done, and for which they put her in jail.

    But now – Ostchem to the rescue!!!

    http://www.kyivpost.com/news/opinion/editorial/detail/120419/

    According to government figures, Ostchem, a company through which he has consolidated control over much of Ukraine’s chemical business, imported with Russian permission about 5 billion cubic meters of Central Asian gas in 2011.

    Moreover, sources close to Firtash claim it imports the gas at significantly lower prices than the blue fuel that goes through Naftogaz.

    These are privileges that few have and it has yet to be explained why Russia would give these favors to Firtash.

    Some experts claim he returns the favor by lobbying Kremlin interests in Ukraine.

    As Ukraine’s tough negotiations with Russia over gas drag on, questions should be asked about why the gas business of Boyko’s alleged associate Firtash is mushrooming while Ukraine considers relinquishing control over its strategic gas transit pipeline in return for lower import prices.

    Interfax-Ukraine reported on Dec. 29 that Ostchem plans this year to boost gas imports by nearly 37 percent, to almost 7 billion cubic meters. Dragon Capital suggested that Ostchem could actually import even higher volumes.

    See how that works, Perfessor? Rent-seeking, anyone? Corruption, Firtash and Boyko?

    Ukraine be damned for a couple of jerks and crooks?

    Comment by elmer — January 15, 2012 @ 8:54 pm

  2. […] Professor speculates on whether there is a new gas war coming up between Ukraine and Russia or if Kiev finally will cede […]

    Pingback by Ukraine-Russia: Gas Conflict Heats Up Again · Global Voices — January 16, 2012 @ 3:38 am

  3. Hey, Elmer–long time no hear. Welcome back. I wondered if a post on Ukraine would bring you out, and I definitely had you in mind when I wrote “the relationship of the Ukrainian government to the truth is thoroughly Sovok (as a one time commenter was fond of pointing out)”–you being the commenter.

    Your info re Firtash and Boyko and Ostchem are very interesting. Thanks much.

    The ProfessorComment by The Professor — January 16, 2012 @ 10:08 am

  4. Thank you, Professor.

    I have been lurking from time to time.

    There is no truth in Ukraine.

    Dysfunctional people, dysfunctional system of government.

    Sovok mafia state.

    Utterly pathetic and utterly bizarre.

    You should see the games they are playing with the valuation of the gas transit pipeline system.

    Suddenly, there is a blitz of sovok mafia Regionnaire types on all the political talk shows about how the system is “worthless” unless it is modernized, and why would anyone want to modernized “unless he owned it,” meaning, of course, sovok mafia thugs.

    All of this as a prelude to the usual – figuring out a new variant on corruption.

    The contract for which they put Tymoshenko and 11 other officials in jail has a re-negotiation clause at Section 4.4:

    http://www.pravda.com.ua/articles/2009/01/22/3686613/

    But without Firtash and Boyko, and middleman corruption, what fun it that?

    Currently, however, both Rasha and sovok mafia Ukraine are promising no interruptions of gas flows to Europe.

    Which is, of course, a bit like Lucy and Charlie Brown and the football.

    Comment by elmer — January 16, 2012 @ 9:21 pm

  5. I don’t mean to flood your blog, SP, but here is an example of the huge dysfunctionality in Ukraine.

    http://tvi.ua/ua/watch/author/?prog=90&video=5265

    Ukraine, along with Poland, is hosting EURO 2012, the big football (soccer) tournament.

    There is a big problem with stray dogs, which have been roaming around for 20 years, but for the most part, people get friendly with them and even take care of them, to a certain extent. Same thing happened in Rasha.

    Naturally, one “has to keep up appearances.”

    And, naturally, one has to keep up corruption.

    So, ahead of EURO 2012, in order to “clean up the streets” for all the drunk football fans, in Ukraine, instead of using the money that has been allocated for treating the dogs humanely ——–

    yep, they are poisoning them, and using mobile crematoriums to burn them while they are still alive in some instances.

    The dogs die an agonizing death, but money is pocketed.

    And —- they’ve cooked up a “rabies” scare. One guy in a town died after he was given “medical care” – due to “rabies.”

    So ——- they quarantined 3 counties.

    They round up the dogs indiscriminately. One guy in the interview is standing with his pet dog who became a victim of the “rabies cleanup.” He is doing everything he can to hold back his tears.

    Brigitte Bardot wrote a letter to Yanusvoloch – “the president” of Ukraine – about the mass slaugther of dogs.

    Humane Societies from around the world have brought this to the attention of “the government” in Ukraine, to no avail.

    This is not the only report that has been done about this.

    Ukraine would really be a much, much better country if it were left to the dogs.

    Why do I raise this? Because the sovoks created things that are not people – they are monsters.

    And this gives you an idea of just how deep the dysfunctionality goes.

    All thanks to the sovok system.

    Comment by elmer — January 17, 2012 @ 8:35 am

  6. “But as any investment banker can tell you, there are ways of structuring deals so that they are effectively sales even if they aren’t called such. (Hence the Tymshenko’s government specifying of a large list of things the Ukrainian government wasn’t permitted to do with its pipes–the law that Yanukovich is trying to change, according to Socor.)”

    Exactly so.

    The Regionnaires are doing a media blitz about how “worthless” the gas pipeline system is, although they do acknowledge that the gas storage facilities are very valuable. In fact, when Rasha shut off the gas in 2009, Tymoshenko had the foresight to make sure that Ukraine’s gas storage facilities were full – that’s how Ukraine survived the gas shutoff by Rasha, which also involved reversing some pipeline flows.

    Anyway – here is an example of the media blitz by the Regionnaire sovok mafia thugs.

    They are absolutely LIVID about the legislation that Socor mentions, and are trying to undo it. There has already been legislation proposed to undo it, but it was withdrawn —- for now.

    The program is “Freedom of Speech.”

    http://svoboda.ictv.ua/index/view-media/id/7003#main

    The topic is “The Cost of Energy Independence.”

    After an initial blitz round, and an audience survey showing that 85% of the people are against the sale of the pipeline system, the host brings the absolutely hideous viper bitch, Inna Bohoslovska (I call her Boogooslonskaya), a Regionnaire.

    She proceeds to rant and rave against the previous government, of course – and the legislation which Socor mentions.

    The discussion goes on from there, and the government “expert” is called on to state a value for the pipeline system – which he is unable to do.

    “It depends.”

    But the theme is that unless Ukraine caves to Rasha, it will simply be a pile of metal.

    There are, fortunately, some sane and intelligent voices after that bitch finishes her diatribes. She is one of the sovok mafia thugs in Ukraine.

    You should also look at this:

    http://foreignnotes.blogspot.com/2012/01/khoroshkovsky-and-rue-group-tighten.html

    Some gas statistics and a bit more on Ostchem.

    For you, these are easy things to figure out, including a solution for the right way to go.

    For the hideously dysfunctional, corrupt thugs in Ukraine, who are masters at making things complicated – not so.

    Plus there is the sovok penchant for talking and talking and talking and talking and talking and chewing the same cud for hours, days, months and years.

    Comment by elmer — January 18, 2012 @ 9:06 pm

  7. @Elmer–not clogging at all. I appreciate your bringing this to my attention. It needs to be more widely known.

    The ProfessorComment by The Professor — January 18, 2012 @ 9:29 pm

  8. Ukrainian public opinion? Who gives a crap about that? They didn’t want to join NATO, so they’re obviously idiots.

    Comment by Mr. X — January 22, 2012 @ 11:25 pm

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