Streetwise Professor

January 20, 2009


Filed under: Economics,Energy,Politics,Russia — The Professor @ 9:18 pm

The Russo-Ukranian Gas War of 2009 is supposedly–and I emphasize this qualifier–over.  The initial news judgment is that Russia–and Putin–came out the winners.  The AP argues, for instance, that:

Russian Prime Minister Vladimir Putin’s tough tactics seem to have paid off in talks to resume gas shipments through Ukraine to Europe, most importantly by doubling the price Ukraine pays for  gas.

Yuschenko criticized the deal, characterizing it as a defeat:

But Ukrainian President Viktor Yushchenko criticized as a “defeat” the deal clinched by his prime minister, his former ally turned rival, saying the price set for Russian gas was too high and offsetting transit rates for Ukraine too low.

But, as always seems to be the case when one says the words “Russia,” “Ukraine,” and “gas” in the same sentence, what really happened, and the implications of whatever happened, are very difficult to determine.  So there’s supposedly a 10 year deal in which Ukraine agrees to pay “European prices” for gas, and Russia agrees to pay “market” prices for transport–but neither term is defined.  (Also, supposedly the transit and gas deals are separate.)  Moreover, intermediaries are supposedly out.  But, given that, ahem, neither Russia nor Ukraine seems to treat contracts as sacrosanct,  with these vagaries, one would have to be very Pollyannish indeed to believe that the prospects for another war same bat time, same bat channel have gone away.  

But, as I say, the conventional wisdom is that Putin has won, and that this is a step towards bringing Ukraine back into the Russian orbit, and out of the Euro-American sphere, with Tymshenko playing shepherd (or would that be Quisling) from the Ukrainian side.  

Things are really too murky for me to judge–and in my view, for anyone to judge–whether that’s indeed the case.  

I will just present one significant data point that contradicts this interpretation.  If Russia is indeed the winner, Ukraine will indeed pay higher prices, and the prospects for a future war with all the adverse immediate economic and long run reputational consequences are greatly diminished, one would expect Gazprom’s stock price to have risen upon news of the settlement.  In fact the opposite has happened:

Note that Gazprom stock price peaked on 6 January, with an intraday high of almost $18.50.  The price has fallen since, even as it became apparent that some settlement along the lines of that just announced would be reached.  The price is now in the $13 range, after trading as low as about $12.50.  So the stock price has lost about 30 percent.  To put things into perspective, over the same period the RTS is down about 15 percent.  

So, if the masterful Gasputin has really engineered such a coup, one that in addition to pulling Ukraine into Russia’s orbit, also secures Gazprom’s economic interests, why has the company’s stock performed so badly?  The market certainly doesn’t seem to think that Gazprom/Russia have “won” (at least commercially) the latest gas war.

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  1. The market certainly doesn’t seem to think that Gazprom/Russia have “won” (at least commercially) the latest gas war.

    Of course, it (Gasputin) did not. By removing RosUrkEnergo (an offshore controlled moitier-moitier by the very same Gazprom and a “strange” businessman named Firtash) the matter of gas transit has been moved from the Ukro-European border to the Ukro-Russian one. The last step required would be to somehow let Europeans into the control of that transit formally and Russia will find itself selling its (well, almost) only strategic good to the EU directrly, right there at its own border. As one of the Russian commentators has put it recently, “in this case we can forget about the danger of the NATO expansion. This will be no longer a joke”.

    Comment by DJ Drive — January 20, 2009 @ 9:47 pm

  2. Jeez, dude–you’re fast. I only posted that 30 minutes ago. Very interesting comment. Have a link to the Russian commentator you quoted?

    The ProfessorComment by The Professor — January 20, 2009 @ 9:53 pm

  3. Oh, and welcome to SWP, BTW. Thanks for your comment–keep ’em coming.

    The ProfessorComment by The Professor — January 20, 2009 @ 9:57 pm

  4. One picture is worth a thousand words:

    But words have their place too:

    Comment by La Russophobe — January 20, 2009 @ 10:28 pm

  5. Et voilà:

    By Andrej Piontkovskij, an owner of a very bright writing style. 🙂

    Comment by DJ Drive — January 20, 2009 @ 11:11 pm

  6. Thanks for the welcome!

    I try not to miss you posts as they are always very interesting.

    Comment by DJ Drive — January 20, 2009 @ 11:16 pm

  7. […] Art? Or not? Gasputin – 01/21/2009 The Russo-Ukranian Gas War of 2009 is supposedly–and I […]

    Pingback by Posts about Putin as of 21/01/2009 — January 21, 2009 @ 2:17 am

  8. Ukraine paying “market” prices for gas means that it will be paying less for gas in the fourth quarter than what it was paying last year. Yes, prices will be higher in the first quarter, but they will simply burn the gas in their reserves (enough to last until April) at which time the price of gas will be readjusted downwards.

    Comment by Michel — January 21, 2009 @ 8:24 am

  9. DJ–Ah. Yes–I’ve read a couple of his books. Very trenchant.

    The ProfessorComment by The Professor — January 21, 2009 @ 11:11 am

  10. Michel hit the nail squarely on the head.

    Tymoshenko openly talked about Ukraine’s gas reserves. Maskva fully expected to freeze the Eastern portion of Ukraine, and to cause a huge ruckus. Instead, Ukraine was well prepared – because they know exactly what Pudding and his KGB thug minions are like. And they did not expect Tymoshenko and Yushchenko to hang together during the gas war. Pudding is a prime example of an incompetent thug government amateur running a business into the ground. The Kremlin/rooshan government owns a decimal fraction over 50% of Gazprom. Yet, the stock price tumbled, as noted. Putkin is going to run Russia, as well as Gazprom, into the ground. (I love neologisms, in case anyone can’t tell.)

    And, as with Georgia, Putkin and the Kremlin are furious that the West did not buy off on the propaganda/media blitz launched against Ukraine, and the US. Sovoks lived and died by propaganda – the truth did not matter. The problem for pudding is that now there is a stock market, which does indeed care about the truth – because it affects —– money.

    Comment by elmer — January 22, 2009 @ 11:02 pm

  11. […] Professor writes this about the Russian-Ukrainian gas deal: “So, if the masterful Gasputin has really engineered […]

    Pingback by Global Voices Online » Russia, Ukraine: Gas Deal and Gazprom’s Stock — January 24, 2009 @ 6:11 pm

  12. He-he, this is exactly what I was talking about: EU, EBRD and WB are going to invest into Ukraine’s gas transit infrastructure:

    Russian’s are more than “happy” 🙂 –

    Comment by DJ Drive — March 24, 2009 @ 7:31 am

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